The war in Iran is transforming the geopolitics of the South Caucasus even though the region is not a part of the actual fighting. For Armenia, Azerbaijan and Georgia, the conflict is a security crisis, an economic shock and a catalyst for changes that had begun prior to 2026: Russia’s declining power, Türkiye’s expanding influence, the emergence of new east-west transport corridors and the growing involvement of the United States, the European Union, China and Central Asian states.

The immediate escalation began on February 28, 2026, when the United States and Israel launched a major offensive against Iran. The death of Supreme Leader Ali Khamenei and other senior officials was followed by Iranian attacks on Israel, American installations, Gulf states and commercial shipping. The elevation of Mojtaba Khamenei as a new supreme leader of Iran preserved institutional continuity. Since then, the conflict around the Islamic Republic has oscillated between active hostilities, short term ceasefires and indirect negotiations – this has direct bearing on the South Caucasus countries which Iran considers part of its influence zone.

Iran’s place in the South Caucasus order

Iran has never been the dominant power in the South Caucasus. That role belonged first to imperial Russia and then, after 1991, to the Russian Federation. Nevertheless, Iran has been indispensable to the region’s fragile balance of power. It has served as Armenia’s southern strategic partner, Azerbaijan’s large trade partner and often political competitor as well as a commercial and diplomatic partner for Georgia. Tehran has also attempted, though with limited resources, to prevent the region from becoming an uncontested platform for Turkish, Israeli or Western influence.

An Iranian analyst based in Tehran argued that on the surface, Iranian policy has often appeared paradoxical. The Islamic Republic, a predominantly Shia state, developed closer strategic relations with Christian Armenia than with Shia-majority Azerbaijan. The logic was geopolitical. Tehran feared Azerbaijani nationalism, Türkiye’s pan-Turkic influence, and Israel’s security relationship with Baku. Armenia, by contrast, represented a counterweight to the Turkish-Azerbaijani alliance and provided Iran with access to the Moscow-led Eurasian Economic Union (EAEU) and markets farther north.

Preserving the Armenian-Iranian border became one of Tehran’s principal red lines. Iranian leaders repeatedly opposed any arrangement that might remove Armenian control over the southern province of Syunik or interrupt Iran’s access to Armenia. This explains Tehran’s hostility towards earlier interpretations of the proposed “Zangezur corridor” and its continuing suspicion of the Trump Route for International Peace and Prosperity, or TRIPP, the American-supported transport project intended to connect mainland Azerbaijan with Nakhchivan through Armenian territory.

The Iran war changes this equation. Iran’s ability to obstruct regional infrastructure projects in the South Caucasus has been challenged at precisely the moment when the United States, the European Union, Armenia, and Azerbaijan are trying to accelerate them. In July, the EU announced up to 200 million euros in grants for South Caucasus transport, energy and digital infrastructure under its “Peace through Connectivity” initiative. The US has likewise exptended diplomatic and material support for TRIPP with the actual work on railway and road infrastructure expanding.

Moreover, Türkiye’s position is strengthening. Azerbaijan’s strategic leverage is growing. Armenia is working to replace its dependence on Iran and Russia with a more diversified but politically difficult network of Western-supported connections. Georgia’s importance as the safest functioning bridge between the Caspian and Black seas is increasing.

Azerbaijan: strategic gains versus growing exposure

Another Iranian scholar based in Tehran argued that of the three South Caucasus states, Azerbaijan faces a stark combination of strategic opportunity and immediate military danger. It shares a long border with Iran, including along its exclave of Nakhchivan, and maintains an close political, energy and security relationship with Israel. Azerbaijan is an important supplier of oil to Israel, while Israel has provided Baku with weapons, technology and security cooperation. In peacetime, this relationship increased Azerbaijan’s military capabilities and bargaining power. During the ongoing war involving Israel and Iran, it makes Azerbaijani territory and infrastructure potential targets as was the case in early March when Iranian drones bombed the Nakhchivan enclave where TRIPP is supposed to operate.

That danger ceased to be theoretical in March. Iranian drones entered Nakhchivan, with one striking the airport terminal and another landing near a school. Four people were reported injured. Tehran denied deliberately attacking Azerbaijan, but Baku temporarily restricted the border and issued unusually direct warnings. Cargo traffic was reopened following a telephone conversation between Presidents Ilham Aliyev and Masoud Pezeshkian, demonstrating that both governments wanted to contain the crisis.

Azerbaijan subsequently announced that it had disrupted several alleged Iranian-linked plots. According to Baku, the alleged targets included the Baku–Tbilisi–Ceyhan oil pipeline, the Israeli embassy, a synagogue and a prominent member of Azerbaijan’s Jewish community. Azerbaijani authorities claimed that explosives had been smuggled into the country under IRGC direction. Iran did not publicly substantiate or accept these allegations, but the targets identified by Baku reveal the country’s and generally South Caucasus’ principal vulnerabilities.

Baku’s preferred policy is therefore deterrence preferably without direct military engagement. Azerbaijani officials have stressed that national territory will not be used for attacks on Iran. This is intended to reassure Tehran while preserving cooperation with Israel and the United States. Maintaining that separation will become increasingly difficult if Iran concludes that Israel’s influence in the South Caucasus has grown. Even unverified suspicions could produce further drone incursions, cyberattacks or covert operations.

Economically, Azerbaijan could benefit from the conflict. Disruption in the Strait of Hormuz and damage to Iranian and Gulf energy infrastructure increase the value of oil and gas that reach international markets without passing through Hormuz. Azerbaijan’s export network – the Southern Gas Corridor, the Baku-Tbilisi-Ceyhn pipeline and the Baku-Supsa system – therefore acquires additional importance. Europe’s attempt to diversify away from Russian energy strengthens Baku’s position further. Azerbaijani gas exports to Europe expanded again in 2026, including supplies to Germany and Austria.

Higher energy prices could increase state revenues and finance military, infrastructure and reconstruction projects. But this advantage has limits. Pipelines, terminals, compressor stations and offshore facilities become more attractive targets as their geopolitical importance rises. Insurance, shipping and security costs increase. Higher global prices also raise the domestic cost of imported food, machinery and consumer goods. Azerbaijan may therefore earn more from exports while simultaneously paying more to protect the system that generates those earnings.

The war also changes the balance surrouding Nakhchivan and TRIPP. Before the conflict, Iran resisted any transport arrangement that appeared to reduce its access to Armenia or create an extraterritorial route along its northern border. A weakened Iran has less diplomatic capacity to block the project. Baku and Ankara can now argue that a direct Azerbaijan proper-Nakhchivan-Türkiye connection is essential precisely because routes through Iran are vulnerable.

The same Iranian scholar argued that for Azerbaijan, this is a strategic opening. A functioning route across southernmost part of Armenia would consolidate the country’s victory in the post-Karabakh regional order, connect it more directly with Türkiye and increase its role in trade between Central Asia and Europe – all within the expanding Middle Corridor concept. It would also reduce Nakhchivan’s dependence on transit through Iran. But the same geography that makes the route valuable makes it vulnerable: infrastructure running close to the Iranian frontier could become a target should active hostilities in and around Iran resume.

Another of Azerbaijan’s long-term concern is a waekened Iranian state. The collapse of central authority could produce refugee crisis and security instability. Although nationalist rhetoric sometimes invokes the Azerbaijani-speaking population of northern Iran, the government in Baku has historically been cautious about cross-border separatism. Most Iranian Azerbaijanis are deeply integrated into Iranian political and social life, while any attempt to redraw borders would expose the Republic of Azerbaijan to an open-ended confrontation.

Optimal outcome for baku therefore is a functioning but geopolitically contrained Iran: strong enough to control its territory and borders, but weak enough to challenge Azerbaijani connectivity projects, threaten Nakhchivan and orAzerbaijan proper. Azerbaijan may emerge as a geopolitical beneficiary of Iran’s declining regional influence, but it is also the South Caucasus state most likely to be struck if the conflict again expands.

Armenia: shifting priorities

For Armenia, the war in Iran is liekwise geopolitcally dangerous. Azerbaijan confronts immediate military risks but also possesses energy resources, Turkish support and growing strategic value to Europe. Armenia depends on Iran as both a physical outlet and a geopolitical counterweight. A prolonged Iranian crisis weakens one of the principal pillars of Armenian strategic autonomy.

An Iranian analyst based in Tehran argued that the approximately 44-kilometre Armenian-Iranian border is short, but its significance is difficult to overstate. With the Armenian borders with Türkiye and Azerbaijan not yet fully normalised, Iran has remained Armenia’s vital southern connection. It provides access to Persian Gulf ports, supports trade with India and offers an alternative to routes through Georgia and Russia. The Iran-Eurasian Economic Union (EAEU) free-trade agreement, which entered into force in 2025, was expected to increase Armenia’s role as a bridge between Iran and northern markets. The prolonged war risks instead disrupting the commercial environment on which that strategy depended.

The immediate impact has been visible at the border. According to UNHCR data, tens of thousands of Iranian entries into Armenia have been recorded since the outbreak of hostilities, although most entrants subsequently returned to Iran or travelled onward. The movement has so far resembled temporary evacuation and precautionary mobility more than permanent mass displacement.

The scale of the potential challenge is far greater than the initial numbers suggest. Even a small percentage of Iran’s population attempting to leave would overwhelm Armenia’s accommodation, border-management and social-service capacity. The country is still managing the integration of more than 100,000 Armenians displaced from Nagorno-Karabakh in 2023. A new influx, particularly one including people requiring medical treatment or long-term protection, could strain public finances and could become politically contentious.

Energy is the second vulnerability. Armenia receives Iranian natural gas under a gas-for-electricity arrangement: Iran supplies gas, and Armenia returns electricity. The quantities are smaller than Armenia’s imports from Russia, but the arrangement provides strategic diversification. It is especially important at a moment when relations between Yerevan and Moscow are deteriorating. Russia supplied roughly four-fifths of Armenia’s gas in 2025 and has warned that Armenia’s movement towards the EU could endanger preferential energy terms.

The Iranian alternative is now less reliable. Strikes have damaged Iranian gas production and domestic energy infrastructure. In July, Iranian officials acknowledged plans to restore 100 million cubic metres of daily production after the country lost substantially more during the conflict. A new 400-kilovolt electricity line could eventually expand the Armenian-Iranian swap, but technical capacity is irrelevant if Iran cannot consistently supply gas or must prioritise domestic consumption.

The deeper problem is geopolitical. Iran served as a barrier against attempts to alter the status of the southern part of Armenia. Tehran’s opposition to a route outside Armenian jurisdiction reinforced Yerevan’s long-held insistence that all transport connections must remain under Armenian sovereignty, customs and law. If Iran becomes too weak to enforce its red lines, Armenia will face greater external pressure to implement TRIPP quickly and increasingly under conditions not entirely favoirabole to Yerevan.

This does not mean that TRIPP is contrary to Armenian interests. Properly designed, it could ease Armenia’s regional isolation, attract investment, create customs and logistics income and open routes towards Türkiye, Azerbaijan and Central Asia. Under the current arrangement, Armenia retains legal sovereignty, while an American-backed development company is expected to build and manage infrastructure. Armenia and Azerbaijan have also agreed to begin integrating energy systems associated with the project.

Yerevan must also reassure Tehran that TRIPP will not become a military or intelligence platform. Iranian officials have long feared a permanent American presence close to the border. During an active war, the distinction between commercial infrastructure and strategic access becomes particularly sensitive. Iran could tolerate a sovereign Armenian road carrying Azerbaijani and Turkish cargo; it would be far more likely to threaten infrastructure perceived as supporting American or Israeli operations.

The Armenian government consequently faces an exceptionally difficult diplomatic balance. It needs Western investment and security engagement, but it cannot afford to treat relations with Iran as expendable. It must advance peace with Azerbaijan without allowing connectivity to become an instrument of dependence. It must reduce Russian energy leverage while its Iranian alternative is being damaged by war.

The most dangerous outcome for Armenia would be the simultaneous weakening of Iran and failure of the peace process with Azerbaijan. That would leave Yerevan strategically compressed between a Turkish-Azerbaijani bloc, an increasingly coercive Russia and an unstable southern neighbour. Conversely, a durable peace, open borders and diversified energy supplies would make the decline of Iranian influence manageable. Iran’s war therefore makes Armenian-Azerbaijani normalisation not less important, but urgent.

Georgia – the return of geography

Georgia does not share a border with Iran and is consequently less exposed to geopolitical uncertaines revilving arounf the Islamic Republic. Yet the economic and strategic consequences from the ongoing war in the Middle East could still be considerable. Georgia occupies the principal functioning route between the Caspian and Black seas. When transit through Iran and Russia become untenable, Georgian railways, roads, ports, pipelines and airspace become more valuable for east-west trade between Central Asia/China and the European Union.

The war in Iran has already redirected aviation. The closure or restriction of Iranian and Middle Eastern airspace forced carriers to use routes across the Caspian and South Caucasus. Regional estimates suggested that daily air traffic over the Caucasus briefly increased several times over. Georgian airports and air-navigation services can earn additional revenue, but congestion, security requirements and the risk of miscalculation also rise.

The same logic applies to surface transport. Iran was one of the routes through which Asian and Central Asian cargo could reach Türkiye and Europe. Disruption strengthens the Middle Corridor running from China and Central Asia across the Caspian, Azerbaijan and Georgia to the Black Sea or Türkiye. It also increases the strategic relevance of the Baku–Tbilisi–Kars railway, Georgian ports and other vital infrastructure spanning Georgian territory.

Anaklia’s proposed deep-water port becomes more important in this environment. If developed successfully, it could absorb growing container traffic and connect Central Asian producers more directly with European markets. The Georgian government’s decision to retain control over the port’s core infrastructure while allowing foreign terminal investment may appeal to Azerbaijan, Kazakhstan, Uzbekistan and other states seeking alternatives to both Russia and Iran. But the opportunity is conditional: without rail modernisation, efficient customs procedures, digital coordination and predictable governance, diverted cargo will encounter bottlenecks rather than a reliable corridor.

Georgia is comparatively insulated from direct Iranian gas disruption because Azerbaijan dominates its gas needs. Nevertheless, it remains vulnerable to global oil and food-price inflation. The war has reduced energy flows through Hormuz, damaged Iranian production and increased shipping and insurance costs. The IMF has noted that the conflict is transmitting economic pressure through energy, trade and financial channels, while the EBRD reduced its regional growth expectations and warned of higher inflation.

Tourism represents an additional Georgian vulnerability. Middle Eastern visitors have become an important component of the country’s tourism market, while Iranian travellers contribute to seasonal demand in Tbilisi, Batumi and other destinations. Flight cancellations, currency weakness and uncertainty could impact these flows. Tbilisi’s diplomacy reflects these concerns. Georgia expressed condolences after deaths in both Iran and Israel, called for de-escalation and later condemned the drone strike on Nakhchivan.

This balancing policy is understandable, but Georgia remains the least directly threatened but potentially the well positioned to benefit economically – the war creates demand for Georgian connectivity. Its advantage, however, depends on infrastructure investment, sanctions compliance and the physical protection of pipelines, ports and digital systems.

A wider struggle over the Caucasus

The conflict is accelerating the internationalisation of the South Caucasus. Russia remains influential, particularly through trade, energy and its military presence, but it no longer monopolises regional security. Moscow is constrained by the war in Ukraine and to a certain degree dependent on Iran for military and logistical cooperation. The two wars are now intersecting in the Caspian and the Black seas: a Ukrainian strike on an Iranian commercial vessel in late July demonstrated that Iranian-Russian supply networks can be targeted far beyond the Black Sea.

Türkiye is the clearest relative winner. Its alliance with Azerbaijan, improving dialogue with Armenia and control of routes into European markets allow Ankara to shape the post-Iranian regional order. But Türkiye also fears Iran’s weakening. Refugee flows, Kurdish militancy, arms trafficking and uncontrolled escalation would threaten Turkish security. Ankara consequently favours an Iran that is geopolitically constrained but the one that manages to keep its territorial integrity.

The United States and EU see an opportunity to connect the Caspian and Central Asia to Europe while reducing dependence on Russia and Iran. China has a parallel, although not identical, interest in stable east–west trade. Beijing does not want Iran to collapse or Hormuz to remain closed, but it will support routes that protect Chinese commerce from geopolitical chokepoints. This convergence gives the South Caucasus unprecedented strategic value, while also exposing it to competition among external powers. The most effective regional response would be deeper cooperation among Armenia, Azerbaijan and Georgia. Shared vision on regional connectivity and the need to provide a unified response. Political mistrust makes such cooperation difficult, but the threat environment increasingly disregards national boundaries.

Between de-escalation and prolonged instability

The most plausible scenario is a prolonged period of unstable deterrence: intermittent strikes, indirect negotiations, partial reopening of Hormuz and continued pressure on Iran’s nuclear and missile infrastructure. The Iranian state will be more securitised, more dependent on the IRGC and more inclined to interpret neighbouring infrastructure through a military lens.

A negotiated settlement in the Middle East would improve the outlook but would not restore the previous order. Iran’s military vulnerability has been exposed, its economy has been further damaged and its capacity to dominate regional outcomes has declined. Armenia, Azerbaijan and Georgia would continue diversifying routes even after hostilities ended.

The worst scenario for the South Caucasus would be fragmentation of Iranian authority. Mass displacement, unsecured weapons, ethnic conflict and competition over nuclear and military facilities would require a regional response far beyond the capacity of any South Caucasus state. Armenia and Azerbaijan would confront direct border emergencies, while Georgia would become a transit and secondary migration destination. Türkiye, Russia and possibly Western states would be drawn into parallel interventions with conflicting objectives.

A long-term lesson is that none of the South Caucasus countries should seek Iranian collapse. Azerbaijan should combine strong deterrence with a clear refusal to become a platform for attacks, while avoiding ethnic irredentism that could turn Iranian instability into a generational conflict. Armenia must preserve working relations with Tehran while developing alternative energy and transport connections under sovereign Armenian control. Georgia should convert its growing transit importance into durable infrastructure while strengthening pipeline security, cyber defence and compliance with international sanctions.

A bird-eye view

Some fundamentals of Iran’s foreign policy toward the South Caucasus have endured and are likely to remain so in the coming years. Iran continues to approach the South Caucasus as a single strategic space connecting its northern frontier to Russia, the Black Sea, Europe and Central Asia. Its policy is fundamentally defensive: Tehran seeks to prevent the region from becoming a platform for hostile powers, preserve existing international borders and ensure that emerging transport corridors do not diminish Iran’s geopolitical relevance.

Relatedly, another of Iran’s objectives is to limit the strategic penetration of outside actors. This explains Iran’s support for the “3+3” format, bringing together Armenia, Azerbaijan and with Iran, Russia and Türkiye (Georgia has so far refused to paticipate). For Tehran, the mechanism embodies the principle that South Caucasus security should be determined regionally rather than by the United States or European Union. The format also allows Iran to participate in negotiations despite lacking the political, economic and military influence enjoyed by Russia and Türkiye.

Economically, Iran wants the South Caucasus to function as an extension of its transit network. It promotes the International North-South Transport Corridor, the Persian Gulf-Black Sea route and connections linking Iran with Armenia, Georgia and Russia. These projects are intended not merely to increase trade, but to prevent Iran from being bypassed by Turkish-backed East-West corridors. Access through Armenia and Georgia to Black Sea ports will remain valuable as sanctions and conflict constrain Iran’s traditional commercial routes.

Iran therefore should be best understood as a status-quo power in the South Caucasus. It supports Armenian-Azerbaijani reconciliation because renewed war could invite foreign intervention, threaten its borders and disrupt trade. Yet it opposes any peace architecture that produces new geopolitical dividing lines or institutionalizes an external (American, Israeli or Turkish) strategic advantage. Tehran’s preferred vision is a decentralized South Caucasus in which borders remain unchanged, regional states are unable to build exclusive alliances and Iran retains an indispensable role as both security stakeholder and economic partner.

Emil Avdaliani is a research fellow at the Turan Research Center and a professor of international relations at the European University in Tbilisi, Georgia. His research focuses on the history of silk roads and the interests of great powers in the Middle East and the Caucasus.