Regional turmoil tests Azerbaijan–Armenia dynamics

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The war in Iran has rapidly upended regional security, triggering spillover across the Middle East and raising fears of wider economic disruption that could threaten globalisation.  

Violence has already spread beyond Iran’s borders, with renewed clashes between Israel and Hezbollah in Lebanon, the closure of the Strait of Hormuz, and strikes on Gulf energy infrastructure. Together, these developments point to a conflict no longer contained, but one reshaping the region’s strategic and economic landscape.

Azerbaijan, too, has been affected by these developments. On 5 March, four Iranian drones - although Tehran has denied responsibility - violated Azerbaijani airspace over the Nakhchivan region. One struck an airport building, while another fell near a village school. Azerbaijan’s president, Ilham Aliyev, condemned the incident, describing its perpetrators as “dishonourable” and warning against testing the country’s resolve. The Ministry of Defence also stressed its readiness to respond appropriately.

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However, the situation stabilised quickly. Two days later, Iranian President Masoud Pezeshkian, in a gesture rare for Tehran, apologised to neighbouring countries for strikes on their territories. The following day, President Aliyev reciprocated by congratulating the newly appointed Supreme Leader, Mojtaba Khomenei, and ordering the dispatch of humanitarian aid to Iran.

Although Armenia has not been directly affected by the military action, Yerevan cannot remain indifferent. Azerbaijan’s Nakhchivan exclave lies just 50 km from the Armenian border. More importantly, Armenia’s foreign policy has combined security cooperation with Tehran alongside a gradual westward shift and growing ties with the Donald Trumpadministration. Yet, as Gulf states have already learned, even positive neutrality may not be sufficient to guarantee security amid widespread regional instability.

Armenia’s delicate strategic situation

These factors are increasing the importance of the peace process between Baku and Yerevan. Images of explosions and air raid sirens in major Middle Eastern cities may reinforce the argument that peace with Azerbaijan - criticised by the Armenian opposition as capitulation - is worth preserving. If the conflict persists, Prime Minister Nikol Pashinyan and his government are likely to seek to capitalise on this sentiment.

Moreover, Baku’s experience in balancing relations with Iran and managing associated risks could prove instructive for Armenian diplomacy. Following recent talks in Washington, Yerevan faces a more uncertain relationship with Tehran. Pashinyan was quick to signal a constructive approach in the aftermath of the drone incident, suggesting Armenia could allow Azerbaijani vehicles to use existing roads to access Nakhchivan if necessary.

At the same time, there is a risk that external actors may encourage Armenia’s opposition to intensify anti-Azerbaijani rhetoric, framing the broader regional conflict as an opportunity. Some opposition voices are already promoting the idea that a confrontation between Baku and Tehran is inevitable, portraying it as a chance to challenge the outcome of the 44-day war and reclaim lost territories.

Connectivity and economic impact

One notable development is the proposed Trump Route for International Peace and Prosperity (TRIPP), a transport corridor intended to link mainland Azerbaijan with Nakhchivan through Armenia. The route is envisioned as part of a broader logistical network connecting Europe and Central Asia, as well as a symbol of sustainable peace.

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The project is to be developed by a joint U.S.–Armenian company, with a significant American role. However, as the route would run close to the Iranian border, it is vulnerable to geopolitical tensions. In the aftermath of the war, Iran may adopt a more hawkish stance towards any U.S. or Israeli presence, increasing pressure on South Caucasus states. While not the most likely scenario, both Baku and Yerevan would be wise to prepare contingency plans - potentially pursuing construction independently or seeking alternative financing if the U.S. withdraws or delays its involvement.

The conflict also places the South Caucasus face-to-face with a range of economic challenges. All three regional countries import substantial quantities of goods from Iran, including foodstuffs such as fruit and vegetables. Prolonged disruption could encourage greater intra-regional trade, giving fresh impetus to economic normalisation efforts initiated by Baku in late 2025.

For Armenia, Iran is also a key supplier of gas and petrol. Yerevan has recently explored increasing gas imports from Iran to up to 2 bcm annually to reduce dependence on Russia. Should this option become unavailable, Azerbaijan may emerge as the only viable alternative. The Armenian government has already examined the feasibility of reconstructing the Kazakh–Ijevan pipeline and may also consider expanding petrol imports from Azerbaijan to replace Iranian supplies.

Economic effects and shifting trade patterns

The conflict may also affect the economies of Gulf states, particularly the United Arab Emirates, which has become a major investor in the South Caucasus. A decline in foreign direct investment could push regional countries towards deeper economic cooperation and greater self-sufficiency.

This trend could be reinforced by stronger links with Central Asia, which has experienced steady growth since 2016. Rich in energy resources and home to a well-educated population, the region shares an interest in balanced and stable foreign policies - potentially allowing it to emerge as a zone of stability amid global uncertainty.

However, such an outcome will remain elusive unless South Caucasus states develop effective regional security mechanisms. A peace agreement between Armenia and Azerbaijan could pave the way for a structured trilateral consultation framework, potentially evolving into a “C3+” format, akin to Central Asia’s C5+ model.

Last year’s meeting of the three countries’ deputy foreign ministers in Tbilisi offered an early indication of this possibility. Ideally, such a framework would bring together heads of state and key ministers to facilitate regular, coordinated responses to shared challenges. The war in Iran, with its wide-ranging regional implications, may serve as a stark warning - and a catalyst for closer cooperation.

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News Politics Azerbaijan Armenia Israel Hezbollah Lebanon Iran