“In this note, we briefly assess the escalation in geopolitical tensions between Iran and Israel. We ask four questions about the factors behind it and draw possible implications for the oil market and beyond, including for our investment strategy. 1. Israel, the US, the Arab states: misaligned interests Both the Trump administration and Arab states see Iran as a degraded regional threat as a result of fallout from the Gaza war. They are in favour of a diplomatic solution concerning its nuclear program. Israel, on the other hand, sees Teheran’s current weakness as an opportunity to engineer a regime change. 2. Two scenarios There is too much uncertainty to confidently predict how the situation will unfold. Our baseline scenario sees the current military tensions as being short-lived, with the interests of the US, Arab countries and the broader international community prevailing. Our low-probability risk scenario has Iran responding by targeting oil supply (either facilities in Saudi Arabia or, in a worst case, blockading the Strait of Hormuz).”
Morten W. Langer
