On the surface, President Trump’s rhetoric earlier in the week was rather encouraging, after he claimed that the US would be leaving Iran in the “very near future”. Investors have been burned before, however, and have learned not to overreact to his often disingenuous jawboning. Indeed, online betting market Polymarket is now assigning less than a 10% probability of a ceasefire by the end of March, one-in-three by the end of April and only a 50/50 shot that the conflict concludes by the end of June.
As we’ve stressed since the start of the war, the most important aspect of the geopolitical flareup is the ongoing blockage of the Strait of Hormuz. While nonenergy trade through this vitally important shipping lane is relatively small, the disruption to energy supply, which accounts for between 80-95% of traffic through the strait, is triggering no shortage of volatility in commodity markets. Brent crude oil futures have surged above $100 a barrel, while European natural gas prices have doubled since the war began.
The acute uncertainty and volatility in markets is making it increasingly challenging for both investors and international businesses to plan ahead. To assist, we have outlined in the following document what we see as the four main Iran war scenarios (best, short term, medium and worst case), and the implications that each could have for markets, the global economy, trade flows and sectors.
Read our comprehensive analysis to see how our best-to-worst-case scenarios could reshape energy supply chains and the global economic outlook.
