Recent rhetoric and action from leaders on both sides of the conflict suggest that not only is a swift resolution unlikely, but that the war could drag on for many more weeks - Polymarket suggests a mere 50% chance of a ceasefire by the end of May. The most pressing issue for markets, and central bank members for that matter, is the ongoing closure of the Strait of Hormuz -one of the world’s primary oil shipping routes. A prolonged closure here not only adds to the geopolitical uncertainty but could have serious inflationary implications.
Our forecasts are predicated on a base-case scenario that assumes resolution of the conflict in the near-to-medium term. Recent rhetoric from President Trump leads us to believe that the US is seeking a relatively quick “off-ramp” so as to avoid further entanglement and limit the economic and political fallout ahead of this year’s midterm elections. In other words, we think thatTrump will want to orchestrate a controlled de-escalation and exit from Iran in a manner that can be reasonably passed off as a“win”, even if it fails to deliver on all of the war’s initial objectives, including a regime change.
Align your strategy with our newly updated 2026 and 2027 Latam currency forecasts—read the full report here.
