The History of Conflict with Iran

As the U.S. conflict in Iran enters its third week, we felt writing about the conflict and the history that got us here would make sense. Let’s start by examining the history that set the stage for the United States and Iran to be pitted against each other. In 1953, the United States and the United Kingdom organized a coup to overthrow the then-current Prime Minister Mohammad Mosaddegh. Mr. Mosaddegh was considered too close to the Soviet Union, and the West feared that Iran would team up with the Soviet Union during the height of the Cold War.

Shah Mohammed Reza Pahlavi took over in a fully authoritarian regime, but one that was more friendly to the United States. This coup initiated some of the negative sentiment against the United States. By 1979, an Iranian Revolution erupted, and Mr. Pahlavi was forced into exile, ultimately landing in the United States for cancer treatment. At the time, Iran’s leadership was taken by Ayatollah Ruhollah Khomeini. Mr. Khomeini had the highest rank of the religious hierarchy of Shia Islam, which was the fundamental political theory of the theocratic regime. Mr. Khomeini wrote substantially about the problems of the West and the United States, and that they were the primary rival of the Islamic Republic of Iran.

Ayatollah Ali Khamenei

In 1989, Ayatollah Ruhollah died, and his position was taken over by Ayatollah Ali Khamenei, who has stayed in power ever since until his death in the early stages of the U.S. conflict that began on February 28, 2026. Mr. Khamenei was a hardline leader who made a great effort to strengthen the Islamic Revolutionary Guard Corps (IRGC). The IRGC is a multi-service primary force comprising five branches: Ground Forces, Aerospace Force, Navy, Qods Force, and Basij. The IRGC is heavily involved in the Iranian economy and is the primary support system for the Iranian proxy forces in Iraq, Syria, Palestine, Lebanon, and Yemen.

The United States has tried diplomacy over the years as a way to get Iran into a better position. The most recent attempt at diplomatic relations was the Joint Comprehensive Plan of Action (JCPOA) launched by President Barack Obama in 2015. That plan was designed to limit Iran’s ability to pursue nuclear weapons in exchange for sanctions relief. In 2018, President Donald Trump pulled the U.S. out of that plan based on intelligence that Iran continued to develop nuclear weapons in secret underground facilities. Relations with Iran have been poor and gotten worse since the end of the JCPOA.

Iran – Military Escalation

Since the end of the JCPOA, Iran has continued to pursue developing a nuclear weapon and continued its proxy support of organizations meant to bring harm to the United States and/or Israel. Those organizations include Hamas, Hezbollah, and the Houthis. Hamas, in particular, has been a devastating challenge for Israel, given the substantial attack on Israel in October 2023. Israel decided to launch decapitating attacks on Iran in its Twelve-Day War starting in June 2025. During this time, the United States entered the war with Operation Midnight Hammer. The operation included the use of bunker buster bombs dropped by B-2 bombers at the Fordow Uranium Enrichment Plant, the Natanz Nuclear Facility, and the Isfahan Nuclear Technology Center. Although final damage is not known, the general assumption is that enough damage was done to set the Iranian nuclear program back by months to years.

Operation Midnight Hammer

One hope of the Trump administration was that Operation Midnight Hammer would show the Iranian regime the overwhelming military force of the United States and force them to capitulate and enter more useful and pragmatic negotiations about their nuclear program. As far as the U.S. and Israel are concerned, that did not happen, leading to the substantial naval buildup around Iran and ultimately to Operation Epic Fury to fully break Iranian resistance. That’s where we are now.

Operation Epic Fury

On February 28, 2026, the United States and Israel launched Operation Epic Fury to dismantle or destroy the Iranian nuclear program, its military capabilities, and proxy support, along with a secondary goal of regime change. Together, the U.S. and Israel have launched thousands of strikes in pursuit of these goals. The level of destruction in Iran is overwhelming, and it’s hard to imagine how the economy will work in the short term. It appears that the Iranian military is broken, with virtually all its air force and navy destroyed. It must be noted that obtaining real-time information about the war is difficult. Yes, we see headlines, but the fog of war limits the reporting. Thus, although we feel confident that progress has been made, we don’t know the extent of the operations.

At this point, however, the Iranian regime remains in control, and its pursuit of the closing of the Strait of Hormuz to upend global energy is a problem. It is unclear and/or unknown if the Strait can be reopened to allow energy flows to resume. It appears this is getting higher on the agenda in terms of breaking Iran’s ability to close the Strait. Of course, the U.S. knew the Strait of Hormuz would be a target for Iran and must have known the conflict would eventually get to this stage. But the general assumption was that the decapitating strikes of the early days might collapse the regime and avoid issues with the Strait of Hormuz. If that truly was the strategy, it seems to be proving incorrect.

Mosaic Defense System

Iran knows it is entirely incapable of competing with the military capabilities of both the United States and Israel. Because of this, they have developed a somewhat unique and specialized internal system to maintain control as foreign powers devastate their systems and infrastructure. This system has been described as a Mosaic Defense system. The Mosaic Defense system relies much less on broad-based communication and allows individual commanders to make decisions without a normal chain of command. Although a system such as this has its cons, like local decisions interrupting strategic flows of information and munitions, it does allow the system to remain effective while supporting infrastructure is taken out of commission. Iran prepared for what it knew would be a devastating military attack either from the U.S., Israel, or both. As the conflict enters its third week, it appears those preparations have kept the regime in control,  and it will take time for the Trump administration to fully dismantle Iran’s capabilities or decide it’s time to end the war and move on.

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Barron Financial Group, LLP is a fee-only Registered Investment Advisor regulated by the Securities and Exchange Commission.

This newsletter is for general information only and should not be considered investment advice.  Investors should consult with a trained investment professional to discuss their particular situation.

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