Tensions between the U.S. and Iran have escalated sharply ahead of the United Nations General Assembly meeting this week in New York. President Donald Trump intensified his rhetoric by threatening to either cripple Iran’s economy or topple its leadership if Tehran fails to strike a deal. Iranian President Masoud Pezeshkian plans to attend the UN gathering and engage in discussions with other world leaders, while the U.S. continues to keep diplomatic options open, including the possibility of a meeting between Trump and Pezeshkian.

Iran’s military has warned of harsh retaliation if the U.S. or its allies initiate a new large-scale strike, describing any such move as grounds for targeting U.S. interests and regional partners supporting American actions. Tehran’s Khatam al-Anbia Central Headquarters declared that sustained and effective counterattacks would follow in response to any aggression, raising concerns about a broader regional conflict. The warnings come amid ongoing conflict, which intensified after a June memorandum aimed at easing tensions collapsed.

The conflict is contributing to ongoing instability in the global oil market. Despite some recent progress in U.S. efforts to maintain oil shipments through the Strait of Hormuz, analysts at Eurasia Group forecast that oil prices will stay elevated, ranging between $90 and $110 per barrel through the end of the year. Iran continues to leverage its military influence by using proxies and conducting tanker attacks to exert control over shipping lanes, insisting on the removal of a U.S. naval blockade and sanctions as conditions for reopening the crucial waterway.

In addition to developments on the military and diplomatic fronts, the U.S. State Department has issued security warnings in light of escalating missile and drone attacks on Saudi Arabia’s capital by Iran-backed Houthi militants. Saudi authorities intercepted several attacks without casualties, but these incidents further heighten fears of broader regional instability. The situation remains volatile, with both sides entrenching their positions despite ongoing diplomatic efforts to resolve the crisis.