[MaxWilson]

Ambient damage like from heat/cold auras, or Cloud of Death, etc., is calculated for a unit at the very start of its side's turn. If player A and B both have units within the same ambient effect, it will go like this:

Player A's units take ambient damage.
Player A's mages cast spells, may inflict direct damage on A or B.
Player A's units move/attack.
Player B's units take ambient damage.
Player B's mages cast spells, may inflict direct damage on A or B.
Player B's units move/attack.
Player A's units take ambient damage.
Player A's mages cast spells, may inflict direct damage on A or B.
Player A's units move/attack.
etc.

-Max