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 conducted a drone attack on Azerbaijan, dragging this Caspian Sea energy powerhouse into an expanding regional conflict that has been escalating 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 personally visited the Iranian embassy in Baku to pay respects after the assassination of Khamenei. Since the outbreak of hostilities 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.

The Iranian armed forces’ general staff 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.

Iran is already overwhelmed with the U.S. and Israel; why target Azerbaijan?