Iran is stepping up its shadow war with Israel to boost its clout — but it could backfire

• Iran is keen to take advantage of Hamas' terrorist attacks on Israel.

• But it appears wary of provoking a wider, regional war.

• However, events could spiral, and Iran could feel compelled to wade into the conflict.

Amid the war between Israel and Hamas, US officials warned this week that Iran-backed militias were planning to step up attacks on US bases in the Middle East.

There are "red lights flashing everywhere," a US official in the region told CNN.

Iranian proxies are trying to take advantage of the chaos unleashed by the October 7 Hamas terrorist attacks, analysts told Insider, to further damage Israel and boost its clout in the region.

But Iran is walking a tightrope, and although it appears keen to damage Israel through its network of militias and proxy groups, it's wary of blowback from the US and Israel.

Hamas' terror attacks are part of a broader plan

Israel and Iran have long been engaged in a shadow war in the Middle East, with both countries involved in a gradually escalating pattern of hostile action.

As part of this covert war, Iran has funded and trained a network of militias stretching across the Middle East. These militias have been used as proxies to wage war against its regional foes.

Among the most notable are Hamas, the Gaza-based group that launched the October 7 terrorist attacks, and Hezbollah, the Lebanon-based militia that launched rocket attacks against Israel in recent days.

Hamas militants killed more than 1,400 Israelis in the October 7 attacks, injured more than 5,400, and kidnapped over 200 people, according to Israeli officials. The retaliatory Israeli airstrikes on Gaza have killed more than 5,000 and injured more than 15,000, according to Palestinian officials.

Reports in The Wall St Journal and The New York Times claimed that Iranian officials appeared to have had involvement in planning and approving the attacks by Hamas — though other experts are skeptical of direct Iranian involvement.

But regardless of whether Iran had a direct role in instigating the violence, it will likely have welcomed the results, say experts.

Analysts say that the Hamas attacks were likely aimed at derailing talks to normalize relations between Israel and Saudi Arabia, Iran's main regional foes. The discussions were launched as part of the Trump administration's Abraham Accords, which aimed at repairing diplomatic ties between Israel and regional powers while sidestepping the vexed issue of a Palestinian state.

"Iran regard Israel as a threat and therefore, any form of rapprochement, normalization in relations between Israel and other states across the region — particularly those geographically close to Iran — represents a threat to Iran," Tobias Borck, an analyst at UK-based think tank The Royal United Services Institute (RUSI), told Insider.

He cautioned against linking the October 7 attacks to a masterplan by Iran to derail the talks but said Tehran would likely have welcomed the ramifications.

The waves of airstrikes Israel unleashed on Gaza in response to the October 7 attacks have enraged the Arab world, and seemingly scuppered the Israel-Saudi talks.

And Iran and Hezbollah have sought to stir the rage further, calling for protests and attacks on Israel. Iran has threatened Israel with the prospect of a wider regional war if it invades Gaza, reported Al Jazeera.

But Iran faces a dilemma 

Iranian officials have told Reuters that Iran faces a dilemma in its response to the Israel-Hamas war.

If it doesn't respond, its strategy for regional ascendancy based on rallying the region around opposition to Israel will have been badly damaged.

But if Iran acts and is proven to be behind attacks on Israel, it could provoke a direct confrontation with Israel and the US, which Iran is ill-equipped to fight.

The US has deployed two aircraft carrier battle groups to the region to deter aggression by Iran and Hezbollah, and Iran's leaders know they would be badly outmatched in a direct clash with the superpower.

"I think the Iranians probably want this conflict to be limited to Gaza, and the West Bank," Alex Vatanka, an expert on Iran at the US-based Middle East Institute, told Insider.

"From Iran's perspective, an Israel sucked into guerilla warfare in Gaza and the West Bank is enough for now: it keeps Israel busy and shaken and distracted to go after Iran while also making the expansion of Abraham Accords into an impossibility since Arab leaders would have to distance themselves from Israel."

Iran's ally China is wary of the war spiraling out of control

Another factor holding Iran back is its close ties with China, one of the few global powers with which it retains strong economic ties.

China has sought to use the Israel-Hamas war to its advantage, declaring support for a Palestinian state and refusing to criticize Hamas in an apparent bid to gain favor among Arab states.

It is in the unusual position of having close ties both with Iran and Israel, and has offered to use its ties to help broker peace between them.

But China is likely wary of a wider conflict in the region, that could undermine the trade links it's formed and slow the flow of Middle Eastern oil. It's likely that it's placing pressure on Iran not to escalate the conflict.

"China is primarily an economic actor in the Middle East and its interests in the region are threatened if the conflict escalates," Jonathan Fulton, an analyst at The Atlantic Council, told Insider.

"Iranian behavior is a key factor in whether this remains contained or spreads into a wider regional war.  Since China is Iran's most consequential partner I expect it is highly motivated to keep Iran from any actions that would further destabilize the region."

But despite the limits faced by Iran if it escalates the war, events could spiral beyond its control.

If the Israeli invasion of Gaza results in large numbers of civilian casualties, hardliners in Tehran could place huge pressure on Iran to enter the conflict.

Borck characterized the situation as an "unpredictable dynamic that is driven by headlines, driven by TV imagery, driven by social media footage," of real or alleged civilian casualties.

"And at some point, you know, maybe some extreme or more hardline elements within Tehran, or for that matter Hezbollah, just say like, if we don't go now, how can we ever present ourselves as the great resistance to Israel? And I think that is the dangerous moment," said Borck.

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