Iran's response to Israel will be a choice between revenge and survival. Markets say it's choosing survival

• Iran's generals and its supreme leader Ayatollah Ali Khamenei have pledged revenge, but their actions and language suggest — at least so far — a more measured response.
• An all-out war between Israel and Iran would be devastating to the entire region, but would be particularly damaging to Iran, whose economy is already in dire condition and whose oil facilities could be particularly vulnerable to attacks.
• "⁠In the last two weeks, Israel's decisive blows to Hezbollah have in essence gutted the crown jewel of Iran's regional proxy network," one regional analyst told CNBC.

Iran's powerful proxy network across the Middle East is being dealt blow after blow from Israel, which has dramatically escalated fighting with Lebanese militia group Hezbollah and on Friday killed its long-time leader, Hassan Nasrallah in a series of airstrikes on Beirut.

Hezbollah is Iran's most important strategic ally, operating as both a militant and political organization that Tehran has funded and nurtured since its inception in 1982 to become what is widely seen as the most heavily-armed non-state group in the world.

Beginning with a series of sabotage attacks earlier in September that led to the explosion of thousands of Hezbollah pagers, Israel has gone from disabling massive swathes of the group's communications to taking out its most powerful leader, as well as several other senior commanders.

Iran's generals and its supreme leader Ayatollah Ali Khamenei have pledged revenge, but their actions and language suggest a more measured response so far. An all-out war between Israel and Iran would be devastating to the entire region, but would be particularly damaging to Iran, whose economy is already in dire condition and whose oil facilities could