Azerbaijan has moved from threats of retaliation to active diplomatic engagement with Iran after drone strikes in the Nakhchivan exclave, a shift that could stabilize the region and protect the country’s energy export revenues.

The backdrop is a prolonged US‑Israeli bombing campaign that has pushed oil and gas prices higher, creating a window for Azerbaijan to capture additional revenue while also facing rising inflation and security risks.

Analyst Zaur Shiriyev, a non‑resident scholar at the Carnegie Russia Eurasia Center, noted that “air and land links depend heavily on transit through Iran,” underscoring why sustained disruption could hurt the exclave’s economy. He estimated that a prolonged spike in energy prices could generate up to $7.5 billion in extra annual export revenue for Azerbaijan. The country also hosts about 20 million ethnic Azeris, roughly a quarter of Iran’s population, a demographic factor that heightens the stakes for regional stability. Meanwhile, Meta reported that since the start of 2026 it had deleted more than 700 accounts and three pages linked to malicious actors associated with Iran and targeting Azerbaijan.

During a March 17 phone call, Azerbaijani Foreign Minister Jeyhun Bayramov emphasized that civilian objects should not be targeted and urged a quick, negotiated end to the conflict, echoing the Iranian pledge to investigate the March 5 drone attacks. Azerbaijani officials said the country’s priority is to keep bilateral tensions in check and avoid a scenario that could trigger a wave of refugees or compel intervention on behalf of Iranian Azeris.

With diplomatic channels open and a clear focus on securing energy revenues, Azerbaijan is positioned to mitigate regional instability while capitalizing on higher commodity prices, a strategy that could strengthen its fiscal outlook and reassure investors in the oil and gas sector.