What other variables are there in the Iran conflict?

On February 28th, the United States and Israel launched a joint military strike against Iran, which completely ignited the Middle East geopolitical tinderbox. After the confirmation of Supreme Leader Khamenei’s death on March 1st, gold and crude oil prices staged a classic “rise and fall” pattern today, with market reactions remaining relatively restrained.

On March 2nd, Dongwu Securities stated in their latest research report that the current macro main theme is clear: in the short term, the market will follow the trading logic of “risk aversion first, then easing.” However, the shipping status of the Strait of Hormuz, whether the US will get involved in ground warfare, and internal power shifts within Iran remain the three major tail risks hanging over the market.

Specifically, if the Strait of Hormuz is effectively blocked, it could cause a short-term surge in global oil prices above $100; if the US is forced into a prolonged ground war, it will face soaring oil prices, forced rate hikes, and a backlash from consuming countries; internal power vacuum and succession within Iran will directly determine whether the conflict escalates further.

Dongwu Securities believes that in the long term, the frequency and intensity of global geopolitical conflicts are increasing, and the strategic hedging assets like gold and crude oil are becoming increasingly valuable as core holdings.

Geopolitical Hotspot: Baseline Scenario and Three Major Variables in US-Iran Conflict

The research report points out that Trump’s “pressure for talks through strikes” initially showed some results, but the risks of the Strait of Hormuz and prolonged conflict remain the market’s Damocles sword.

During the military operation on February 28th, Trump announced the launch of “Epic Fire” aimed at destroying Iran’s missile industry, controlling the Strait of Hormuz, and adopting a “zero tolerance” approach toward nuclear facilities; Iran responded with restraint, launching hundreds of missiles and drones under “Real Commitment-4.”

Dongwu Securities states that currently, the market assigns a 64% probability to a ceasefire before April. Under the baseline scenario, after a successful “decapitation” operation by Trump, he has taken the initiative, and both sides are likely to replicate the June 2025 Israel-Hezbollah Twelve-Day War model, declaring victory through limited air strikes to appease domestic politics.

The report estimates that, under the baseline scenario, both the US and Iran will keep the conflict within limited aerial strikes, expecting the situation to cool down within 2-3 weeks. When that happens, risk aversion will subside, oil prices are expected to fall back to the $60-70 range, and gold prices may retreat to around $5,200. Currently, the market assigns a 64% probability to a ceasefire before April.

However, three major variables warrant caution:

• Substantial blockade of the Strait of Hormuz: This strait carries 20%-30% of global oil shipping. If the conflict spirals out of control leading to a real blockade, Brent crude prices could violently break through $100-$110 per barrel in the short term. This is the most critical tail risk to watch.
• Dual backlash of the US getting involved in a prolonged war: If the US is forced to deploy ground troops, it will face a chain reaction: soaring oil prices forcing the Fed to hike rates sharply, directly threatening Trump’s midterm elections; simultaneously, falling into a quagmire similar to the Russia-Ukraine conflict, continuously draining national resources.
• Uncertainty over internal power vacuum in Iran: Whether the temporary leadership committee can suppress divisions within the Revolutionary Guard will determine if Iran moves toward an extreme militarized “military government” model or collapses amid internal and external crises, directly influencing the probability of conflict escalation.

Risk Warning and Disclaimer

Market risks are inherent; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions herein are suitable for their particular circumstances. Invest accordingly at your own risk.