Deadly game they're playing: Why Iran, Israel, and the US can't stop escalating

You have heard the phrase, "They're playing a game with us." It usually implies something trivial—deception, manipulation, perhaps even sport. But when we say the United States, Israel, and Iran are playing a "game", we mean something far more precise—and far more dangerous.

Game theory, the science of strategic interaction and a core branch of modern economics (particularly behavioural economics), is not just for economists or Pentagon analysts. It is a lens anyone can use to understand why two sides that desperately want to avoid a full-scale war keep inching closer to the edge.

Why does Iran not simply stop its nuclear programme and accept a deal? Why does the US not just bomb everything and be done with it? Why does Israel feel compelled to strike pre-emptively, even when Washington pleads for restraint? The answers are not necessarily about madness or irrational hatred. 

To a certain extent, they are about cold, calculated logic within a terrible game where no player fully trusts the other, and where the penalty for being perceived as weak is worse than the penalty for starting a fight—even an unprovoked one.

Consider a classic puzzle known as the Prisoner's Dilemma. Two prisoners are separated. Each can either betray the other or remain silent. If both stay silent, both receive a light sentence. But each prisoner knows that if he stays silent while the other betrays him, he receives a severe sentence while the other walks free.

So the rational choice for each—fearing the other's betrayal—is to betray first. The result is that both end up worse off than if they had cooperated. Now replace the prisoners with Washington and Tehran.

For years, the United States and Iran have faced precisely this trap. The "cooperative" outcome would be a renewed nuclear deal in which Iran limits enrichment in exchange for sanctions relief. Both would be safer and more prosperous. But if Iran cooperates while the US cheats by maintaining crippling sanctions, Iran loses everything—and it has experienced this first-hand. Conversely, if the US cooperates while Iran cheats by building a bomb, the US faces an existential threat.

Therefore, each assumes the other will cheat. The US maintains "maximum pressure", while Iran advances its nuclear programme. Neither achieves the peaceful outcome, yet both feel—or construct a narrative for themselves—that they are acting rationally out of self-preservation. This is not stupidity, but it can be foolhardy. It is the logic of zero trust, and it is driving all sides towards a breakpoint, posturing dangerously close to the cliff.

You might ask, "Can they not just talk?" They do—every day. But in game theory, cheap talk—simply saying "we want peace"—is worthless. What matters is costly signalling: actions so expensive or risky that only a serious player would undertake them.

When the US deploys an aircraft carrier to the Persian Gulf, that signal costs millions—if not billions—of dollars and risks confrontation. The message is clear: "We are committed and ready. 

Do not test us." When Iran accelerates uranium enrichment to sixty per cent—just a technical step away from weapons-grade—that signal risks Israeli retaliation. The message is: "We cannot be pressured into submission."

Even strikes are signals. Israel's alleged operations inside Iran—destroying centrifuges and assassinating nuclear scientists—are costly signals that say: "We will tolerate no nuclear Iran, even if it means war." Iran's response—arming Hezbollah with precision-guided missiles—signals: "If you strike our nuclear sites, we will turn Israeli cities into battlefields."

Every move on this chessboard is a sentence spoken not in words but in blood and treasure. And because each side knows that backing down after a threat would signal weakness, they often escalate precisely when retreat would be wiser. This is the commitment problem: once you declare you will fight over something, backing down damages your credibility in all future games.

The situation becomes even more complex because Iran knows it cannot defeat the US military in a conventional war. That would be folly. Instead, Iran is playing a different game: a war of attrition.

In such a game, the weaker player does not try to win quickly. Instead, it seeks to outlast the stronger player's willingness to endure pain. Iran uses proxies—the Houthis in Yemen, militias in Iraq, and Hezbollah in Lebanon—to bleed the US and Israel indirectly. Every rocket fired at an Israeli town, every drone intercepted over a US base, imposes a small but cumulative cost.

The question is simple: whose patience runs out first? For the US, the pain is political fatigue. For Israel, it is economic and psychological strain. For Iran, it is sanctions, internal unrest, and more. Each side is trying to convince the other that its endurance is greater.

This explains behaviour that may appear irrational. Why provoke Israel with a drone swarm that is likely to be shot down? Because the goal is not destruction. The goal is to demonstrate reach—and to signal that any attack on Iran's nuclear facilities or leadership will trigger a long, bloody, low-intensity conflict rather than a single decisive battle.

In a war of attrition, the player with the higher tolerance for present pain—or the one less concerned about the future—often prevails. Many analysts believe Iran sees itself as having an advantage in this regard.

Most people view the US–Israel relationship as one of master and subordinate. Game theory, however, might frame it more as a complicated partnership in which both sides retain autonomy and occasionally diverge. This is known as a two-level game.

Israel's leadership must answer to a domestic audience that demands security. The US must answer to Congress, allies, and electoral cycles. What appears to be irrational Israeli independence—such as striking an Iranian target without notifying Washington—can be rational when viewed through Israel's fear that the US might eventually strike a deal with Iran that leaves it exposed.

Iran, too, plays a two-level game. The regime must project strength to maintain domestic legitimacy, while also avoiding a catastrophic war that could threaten its survival. This tension produces seemingly contradictory behaviour: fierce rhetoric paired with quiet back-channel diplomacy.

The risk in these multi-player dynamics is what analysts call fractured deterrence. The US might calculate that a limited strike on Iran would be tolerated. Tehran, however, might feel compelled to respond forcefully to deter further attacks. 

Meanwhile, Hezbollah might interpret such a strike as a signal to escalate against Israel. A game that appears to involve two players suddenly involves five or six, each with different fears and red lines. The result is instability—and potentially chaos.

If this is the game, how can it be stopped? Game theory offers several off-ramps, none of which require miracles.

First, change the payoffs. At present, both sides believe that backing down is worse than fighting. The US and Europe could make cooperation more attractive by offering irreversible sanctions relief—not phased over years, but delivered upfront—in exchange for verifiable Iranian limits. Iran, in turn, could offer unprecedented transparency, making cheating virtually impossible. The aim would be to transform the Prisoner's Dilemma into a coordination problem in which both sides benefit only by moving together.

Second, establish credible commitment mechanisms. Trust fails because agreements can be broken. A neutral guarantor—perhaps a coalition involving major powers—could enforce compliance through automatic penalties for violations and automatic rewards for adherence. This would reduce the fear of being exploited while cooperating.

Third, adopt gradual reciprocity. Neither side will leap into full cooperation overnight. Game theory suggests beginning with small, low-risk steps—a prisoner exchange, humanitarian coordination, or a military hotline. Over time, these actions can build a record of reliability and shift perceptions.

Understanding war as a "game" does not trivialise it. On the contrary, it helps explain why rational actors so often drift towards catastrophe. The United States, Israel, and Iran are not merely driven by ideology or emotion. They are participants in a strategic environment that rewards suspicion and punishes trust.

But games can be redesigned. The same logic that explains conflict can also illuminate pathways to de-escalation. A crucial first step is to resist dismissing opponents as irrational and instead attempt to understand the strategic logic guiding their actions. The better one understands the other side, the more effective one's own strategy becomes.

Once we grasp the underlying logic—recognising that human reasoning may be imperfect, bounded, and sometimes emotional, yet still intelligible—we are better positioned to change the game, or to confront it more effectively.

Dr Mohammad Omar Farooq is a Professor and Head, Department of Economics, United International University

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.