A new round of strikes on Iran's water and energy infrastructure risks a far bigger economic fallout than previous rounds, bad news for Israel, the Gulf states, and global oil markets.

• Iran has not yet struck desalination plants or energy infrastructure in Israel and Gulf Arab states, meaning it still has fresh targets to hit back with.
• The other side has already used up its meaningful military targets and can't reach the missile sites hidden under mountains, so it has little new to gain.
• If energy infrastructure gets hit, the fear is retaliation against Gulf and Israeli infrastructure, which could disrupt oil flows through the Strait of Hormuz and rattle the global economy.
• Desalination is a survival issue for the Gulf states, so attacks on water plants would be treated as an existential threat, not just economic damage.
• Separately, reports suggest the U.S. defense secretary could be replaced after the midterm elections, echoing past wartime leadership shakeups.

Outlook: Escalation looks more likely than de-escalation, with oil markets and Gulf stability the main things to watch.