Even though last year’s war between Armenia and Azerbaijan ended in a decisive victory for Azerbaijan, there is no sign of progress towards peace. There are many reasons for this stalemate, but one of them, upon which this article focuses, is that Iran has proven itself unable to come to terms with the new realities on the ground and the defeat it has suffered. Despite correct relations with Azerbaijan, Iran has covertly supported and continues to support Armenia’s position in the latter’s conflict with Azerbaijan, which, backed by Turkey, will not tolerate that policy. As a result, there is a growing danger of an Iran–Azerbaijan conflict, and such a conflict would necessarily spill over into the Middle East because of Turkey’s enhanced role in the South Caucasus and deepening alliance with Azerbaijan. Thus, the ambiguous state of tension between Iran and Azerbaijan builds upon this unresolved crisis between Armenia and Azerbaijan and adds to the desirability and urgency of a peaceful reconciliation.