The Iranian Arena — Monthly Review (July 2026)

Executive Summary

July 2026 was characterized by calculated kinetic escalation and a multi-arena brinkmanship: exchanges of blows between the U.S. and Iran continued, albeit so far at a controlled, relatively low to medium intensity, following the collapse of the ceasefire. These events included Iranian attacks on Jordan that approached the Israeli arena, launches of UAVs toward Israel that were intercepted over Jordan (assessed to be from militias in Iraq), and the return of the Houthis to the cycle of fighting against Saudi Arabia. In parallel, Iran’s effort to covertly begin rebuilding its nuclear program at the underground Pickaxe Mountain facility continued, alongside ongoing economic erosion of the Iranian regime and active attempts to smuggle weapons to Hezbollah through Syria.

It appears that Iran is employing Iraqi militias to attack Aramco facilities in Saudi Arabia. This strategy serves a dual purpose: leveraging oil market prices to apply pressure on the Trump administration, and using these militias as ‘low-signature deterrence’ to distance Tehran from direct responsibility.

The regional conflict expanded significantly with a drone attack on an Egyptian LNG terminal at Damietta Port on July 29, 2026, which struck an American gas tanker. Another major flare-up included a ballistic missile attack by Iran on an American base and an additional facility in Jordan, which occurred after the deaths of IRGC advisors in joint U.S.-Saudi strikes against militias in Iraq on July 29, 2026. This escalation led to American airstrikes in response against a range of targets in Iran, mainly in the south of the country, against Iranian capabilities to strike in the Strait of Hormuz.

On August 2, 2026, President Donald Trump announced the cancellation of the planned military attack against Iran, after claiming (again) that agreements in principle had been reached regarding the opening of the Strait of Hormuz and ending Iran’s nuclear program.

This report analyzes recent developments along four key strategic axes of the Islamic Republic:

Direct kinetic warfare against the U.S.: The U.S. resumed direct strikes in Iran over 13 nights, including a strike on the Darkhovin facility (a nuclear power plant under construction in the southwest of the country) and on IRGC and Artesh (regular army) bases, against the backdrop of the collapse of the previous truce.
The nuclear program: Iran’s physical enrichment infrastructure remains largely paralyzed, but experts warn that Tehran continues a systematic effort to restore capabilities at the Pickaxe Mountain facility.
The Houthi-Saudi arena: The Houthis resumed missile and drone attacks against Saudi Arabia, including a strike on Abha Airport and oil infrastructure, amid the collapse of understandings with Riyadh; Saudi Arabia responded with strikes against Hodeidah, Kamaran Island, and Sanaa.
Proxy support: The seizure of an extensive arms shipment at the al-Tanf crossing on July 16 illustrates that the Iran-Iraq-Syria-Lebanon land route for smuggling weapons to Hezbollah remains active.

Kinetic Warfare: Timeline of Events for July 2026

The main kinetic exchanges of fire between Iran and its proxies against the United States and Saudi Arabia over the past month indicate low-to-medium level friction for now, but one that has expanded geographically and in the number of actors involved (not including Israel directly, although there was intent to also strike Israel via proxy UAV launches). Notable events:

July 12: Iran opened with a broad attack involving the launch of 13 missiles and 8 UAVs toward targets in several Gulf states.

July 14-16: Peak intensity of Iranian attacks, with this wave constituting about half of all fire during this period. The attacks focused on swarms of UAVs (36 UAVs on July 14 alone) aimed at overloading interception systems across the Gulf.

July 13-14: After Saudi Arabia, which supports the legitimate international Yemeni government, struck the runway at Sanaa Airport, controlled by the Houthis, to prevent the landing of an Iranian plane bringing a Houthi delegation back from Khamenei’s funeral, the Houthis accused Saudi Arabia of being behind the attack and declared the end of the “calm phase” in the confrontation with it. In response, the Houthis launched ballistic missiles and UAVs toward the international airport in Abha in southwestern Saudi Arabia.

July 27: The IDF intercepted two unmanned aircraft identified in the Jordan border area. The aircraft did not cross into Israeli territory, and the source of the launch was under review; no alerts were activated in accordance with policy. The main suspicion is that they were launched by a pro-Iranian Shiite militia in Iraq.

July 15: According to Iranian state media reports, the American military struck the base of the Artesh’s (Iran’s regular army) 388th Mechanized Attack Brigade in the city of Iranshahr in Sistan and Baluchestan province, a move that Iranian media claimed resulted in the deaths of seven Artesh soldiers and the wounding of 13 others. On the same day, an additional American strike was also reported against an unidentified IRGC base in the city of Zahedan in the same province.

July 15-28: During the 12 nights preceding July 29, U.S. Central Command (CENTCOM) conducted a continuous and systematic campaign of strikes intended to erode Iran’s military-industrial infrastructure, primarily along Iran’s southern coast. The effort focused on dismantling Iran’s missile and UAV production apparatus, including strikes on factories, launchers, and ammunition depots. At the same time, strategic targets were struck, such as dual-use petrochemical facilities (like the one struck in southwestern Iran, which was used to produce explosive materials for missiles) and Iranian vessels, with an emphasis on mine-laying ships, aimed at ensuring freedom of navigation in the Strait of Hormuz. On July 15, Iran reported that it had retaliated against American targets in Jordan (Muwaffaq Salti Air Base [al-Azraq]), Kuwait (a logistics center), and Bahrain (a command center and warehouses of the Fifth Fleet).

July 19: The U.S. struck the Darkhovin facility, a nuclear energy site that was in partial stages of construction. The International Atomic Energy Agency noted that the facility did not contain nuclear material at the time of the strike. Iran responded by firing missiles toward several regional targets, amid reports of additional strikes on Iranian-controlled islands in the Persian Gulf.

July 18: Prince Sultan Air Base in Saudi Arabia was struck by Iranian missiles and UAVs.

July 18: Iranian UAVs struck strategic infrastructure in Kuwait, including damage to warehouses and power and desalination infrastructure at the al-Zour site, which led to the shutdown of generators.

July 20-21: The IRGC claimed to have destroyed key Amazon data infrastructure in Bahrain using cruise missiles, in response to the American strike on the Darkhovin facility. The facility was struck again by the IRGC on July 24.

July 19-21: Iran launched six ballistic missiles toward the city of Aqaba in southern Jordan. The Jordanian army reported intercepting four of them, with American assistance, while two fell in uninhabited areas. Following the incident, Israeli interception systems were activated over Eilat for the first time since April, as the IDF launched Iron Dome interceptors against missile fragments that could have fallen on Israeli territory; no casualties or damage were reported. Israeli officials clarified that Israel itself was not directly involved in the incident and that Tehran did not directly attack Israel.

July 24: Saudi Arabia struck the city of Hodeidah, controlled by the Houthis, including communications authority facilities as well as sites on Kamaran Island. Explosions were also reported at Hodeidah port, although the Saudi-led coalition denied striking the port itself.

July 25: Saudi Arabia announced that its forces struck Houthi targets in Yemen after the organization attacked two Saudi oil tankers in the Red Sea. Saudi air defense systems simultaneously intercepted two ballistic missiles aimed at refineries in Yanbu. The Houthis declared a siege on the Bab al-Mandeb Strait as an “eye for an eye” response to the attack on Sanaa Airport.

July 29: Amid parallel escalation in Iraq, Saudi Arabia joined the U.S. in strikes against Iran-backed militias in Iraq, described as the first direct Saudi entry into the expanding regional military confrontation. At the same time, the Saudi Ministry of Defense reported intercepting and destroying UAVs launched from across the Iraqi border, attributing them to armed militias that are Iranian proxies. On July 29, a ballistic missile attack by Iran on an American base in Jordan was also reported.

The night of July 29-30: U.S. Central Command (CENTCOM) launched a wide-ranging wave of strikes against dozens of IRGC targets across Iran, in response to the ballistic missile attack toward the American base in Jordan (Tower 22). The strikes targeted command and control centers, missile and UAV production and launch infrastructure, radar sites, and coastal defenses. Strategic hubs were struck on Qeshm Island, Ahvaz (heavy damage), Bushehr province, Abu Musa and Kish islands, as well as a military position in the Piranshahr border area.

August 2: President Donald Trump announced the cancellation of the planned military attack against Iran, which was supposed to be of significant intensity. The decision was made after, according to Trump’s claim, an agreement in principle was reached on a framework for a comprehensive deal involving the immediate, complete, and total opening of the Strait of Hormuz and an end to the Iranian nuclear threat. This was despite the fact that exchanges of fire were still recorded on the same day, including Iranian fire on Qatari gas tankers (GasLog Shanghai) in the Strait of Hormuz. Iran denied any new agreement.

The Nuclear Program: Covert Rebuilding Effort at Pickaxe Mountain

Iran’s nuclear program has not recovered from the severe blows it sustained in the consecutive rounds of fighting against Israel and the United States, but Tehran remains deeply committed to covertly rebuilding its nuclear capabilities over the long term.

According to reports by the Wall Street Journal and CNN, based on Israeli intelligence assessments passed to Washington, Iranian authorities covertly transferred uranium enrichment centrifuges to deep tunnels at the Kuh-e Kolang Gaz La complex (also known as “Pickaxe Mountain”), located less than two kilometers south of the Natanz nuclear complex that was struck during the 2025 war.

Some reports claimed that Iran also transferred part of its enriched uranium stockpile to the underground complex.

The reports come amid heightened tensions in the Persian Gulf and the Strait of Hormuz, as U.S. President Donald Trump warned that American forces are prepared to strike the fortified facility under the mountain in the near future.

However, the accumulated kinetic blows delivered in the two wars with Iran, Operations “Rising Lion” and “Roaring,” severely damaged Iran’s nuclear infrastructure across multiple layers — from the uranium enrichment array and centrifuges to the weaponization facilities and the uranium conversion facility in Isfahan, which was effectively destroyed. Since the rounds of fighting, very little has been done at the main sites — Natanz, Fordow, and Isfahan — but the Pickaxe Mountain site is the exception, according to several reports.

The Pickaxe Mountain facility began construction following previous sabotage incidents at Natanz, and was specifically designed to provide robust underground protection against aerial bombardment, though not necessarily against sabotage operations from within. In a report published on July 14 by the Institute for Science and International Security (ISIS), which included high-resolution satellite imagery, it was noted that it remains unclear whether the facility is active, and that the two western tunnel entrances remain open, leaving them exposed to both precision-guided bunker-buster munitions and ground operations.

It should be assumed that Iran intends to covertly rebuild nuclear activities, including centrifuge production and storage, uranium conversion, enrichment, storage, and metallurgy, in line with a three-decade pattern in which Iran’s nuclear program has always had covert underground dimensions.

The director general of the International Atomic Energy Agency, Rafael Grossi, has consistently noted that his inspectors are unable to fully account for Iran’s uranium stockpile, centrifuges, and related capabilities.

David Albright, president of the Institute for Science and International Security and a former IAEA inspector, told the Wall Street Journal that “it’s plausible that Iran moved centrifuges into the tunnels” at Pickaxe Mountain. According to him, little is known about the complex, but experts estimate it is buried roughly one hundred meters inside the granite mountain.

In a separate event from late June, Albright noted that before the American “Midnight Hammer” operation in June 2025, Iran held approximately 22,000 centrifuges, many of which were operating and enriching uranium to 60 percent, whereas today Iran “is not enriching at all” and most of the centrifuges have been destroyed, although he warned of unresolved risks, including enriched uranium buried at Natanz and Isfahan.

Damage to the Taleghan-2 nuclear nuclear weaponization facility in Parchin and additional sites in the complex remains severe.

Missile Array and Military Industry

The ballistic missile array and the military infrastructure supporting it remain heavily degraded following the series of Israeli-American strikes over recent months, which damaged both the stockpile of launchers and missiles and independent production capabilities. Enormous damage was also inflicted on the ballistic missiles that are part of Iran’s nuclear program. The damage to the ability to produce new missiles was significant.

At the same time, according to another ISIS institute report published on July 10, rehabilitation and reconstruction activity was observed at the Talkan-2 facility itself, including intensified sealing work and concrete reinforcement over three impact holes created by the bombing, indicating that Iran has moved from the debris-clearing stage to an active rehabilitation stage, despite the cumulative damage from the two rounds.

Proxy Support: The Iran-Iraq-Syria-Lebanon Smuggling Route

On July 16, 2026, Syrian authorities announced that they had foiled an attempt to smuggle an extensive weapons shipment to Hezbollah at the al-Tanf crossing on the Iraq-Syria border (known on the Iraqi side as the al-Waleed crossing)

This is further proof that the Iran-Iraq-Syria-Lebanon land route continues to be used for weapons transfers even after the fall of the Assad regime. The weapons were hidden inside a fuel truck declared as transporting oil to the city of Baniyas in northwestern Syria, a route routinely used to transfer fuel from Iraq through the al-Tanf crossing to Baniyas, for refining or export via the Mediterranean.

Among the items seen in photographs released by Syrian authorities: at least 100 unmanned aerial vehicles (drones), fiber optic spools, RPG warheads that appeared pre-adapted at the factory for mounting on drones, with dedicated electric release mechanisms and mounting bolts — rather than improvised adaptation as seen previously — guided anti-tank missiles (apparently of the Almas type), and apparently also cruise missiles from the Paveh family.

The scale of the shipment, numbering about 100 drones designed in advance for attack rather than mere surveillance, indicates that Hezbollah and Iran continue a systematic effort to replenish the organization’s advanced weapons stockpile, and that this is not an isolated or improvised attempt. Hezbollah vehemently denied any activity on Syrian territory, describing the claims as “staged narratives with no basis in reality aimed at harming Hezbollah”.

The incident demonstrates that the regime of Ahmad al-Sharaa is acting, at least in some cases, to thwart the continued flow of Iranian weapons through its territory, but also that Iran and Hezbollah continue to consistently explore alternative smuggling routes through Syria, despite the change of regime there.

In addition, according to a Reuters report, Iran is expected to receive in the coming weeks a first shipment of up to 400 Chinese-made shoulder-fired anti-aircraft missile launchers (MANPADS), as part of its efforts to rebuild its defenses amid the fighting against the U.S..

The Iranian Economy

The Iranian economy continues to be swept into a deep and prolonged crisis. According to forecasts cited in several sources, Iran’s GDP is expected to contract this year by approximately 6.1% — the sharpest contraction since the 1980s — while there are discrepancies between different sources regarding the exact annual inflation rate: Iran’s Statistical Center (SCI) reports an average annual inflation rate of about 62%, while the Central Bank of Iran (CBI) reports a rate of about 57.7% for the corresponding period, while external international estimates point to a higher average annual inflation rate of 68.9% for the full year 2026.

At the same time, the Iranian rial continues to weaken sharply, with free-market exchange rates trading in the range of 1.3 to 1.8 million rials per U.S. dollar depending on the date and reporting source — a depreciation reflecting continuous deterioration since the beginning of the year. Basic consumer goods have experienced sharp price surges, including an increase of about 140% in bread and grain prices and about 219% in oil and fat prices in the year ending March 2026, which led Iranian banks to issue, for the first time in history, a banknote with a face value of 10 million rials.

This combination of output contraction, galloping inflation, and currency collapse continues to erode Iran’s middle class and the general public’s consumption capacity, deepening public distrust in the regime’s economic institutions, against the backdrop of the accumulated burden of two rounds of fighting, a naval blockade, and ongoing international sanctions.

Summary

In summary, July 2026 sharpened a picture of multi-front kinetic escalation: the resumption of direct fighting between the U.S. and Iran, the spillover of Iranian fire up to Israel’s border, the return of the Houthis to the cycle of fighting against Saudi Arabia, alongside a persistent Iranian effort to covertly rebuild its nuclear capabilities at the Pickaxe Mountain facility. At the same time, the Iranian smuggling route to Hezbollah through Syria and Iraq remains active despite the change of regime in Damascus, and Iran’s economic home front continues to erode under the accumulated burden of inflation, currency depreciation, and output contraction. As emphasized previously, the central question is not whether Iran seeks to rebuild its capabilities and project deterrence, but at what pace it is succeeding in doing so and when this can be identified in time.