Prior to the Second Karabakh War, the South Caucasus largely remained on the margins of the Islamic Republic of Iran’s strategic calculations and was primarily perceived as a peripheral and relatively low-tension area. However, the geopolitical developments following the 2020 war particularly the shift in the balance of power in favor of the Republic of Azerbaijan, the growing role of Türkiye and other extra-regional actors, and the emergence of new transit corridor initiatives have significantly transformed the region’s position in Iran’s foreign policy. The central problem of this study is to explain how and why the South Caucasus has evolved from a low-priority area into a strategic crisis in the foreign policy of the Islamic Republic of Iran. The study employs a descriptive-analytical method, with data collected from library sources, official documents, analytical reports, and Persian- and English-language scholarly articles. The theoretical framework is based on geopolitical realism and the concepts of balance of power, regional security, strategic depth, and geoeconomics. The main research question is: What historical and geopolitical factors have led to changes in Iran’s foreign policy perceptions and actions toward the South Caucasus following the Second Karabakh War? The research hypothesis holds that intensifying geopolitical rivalries, geoeconomic threats arising from new transit corridors, and the relative erosion of Iran’s strategic depth have transformed the South Caucasus into one of the country’s major strategic foreign policy challenges. The findings demonstrate that, contrary to the view that regards these developments as temporary and primarily security-driven, the reconfiguration of the regional order in the South Caucasus entails long-term implications for Iran’s national interests and geopolitical position.