The flames of war have spread to the Caucasus, and the market is wildly betting that oil and gas prices will reach a new level

On March 5, 2026, Iran launched a drone attack on Azerbaijan, dragging this Caspian Sea energy powerhouse into an expanding regional war that has been ongoing since the U.S.-Israel joint strike on Iran on February 28.

Open-source intelligence confirms the drone model, and a Telegram channel linked to the Islamic Revolutionary Guard Corps even claimed responsibility at one point.

The timing of this attack is highly ironic. Just the day before, Azerbaijani President Aliyev had visited the Iranian embassy in Baku to offer condolences for the death of Khamenei. Since the outbreak of the war on February 28, Azerbaijan has tried to maintain a neutral stance—Foreign Minister Bayramov explicitly assured Iran that Azerbaijani territory would not be used for military actions against Iran.

Aliyev immediately convened an emergency security council meeting, labeling the attack as “terrorism,” declaring a “level one mobilization” of the military, and ordering “preparations and retaliatory measures.” He warned Iran: “Do not test our strength.” Azerbaijan then closed its southern airspace and suspended all freight truck crossings with Iran.

Iran’s General Staff of the Armed Forces denied launching any drones, claiming it was an Israeli “false flag operation”—a conspiracy aimed at “undermining Muslim countries’ relations in various ways.” However, this explanation contradicts physical evidence and conflicts with claims made by channels associated with the Revolutionary Guard.

Now Iran is overwhelmed with both the U.S. and Israel. Why target Azerbaijan?