Goldman Sachs hosted a panel discussion on the Iran conflict which included numerous experts including Sir Alex Younger. We wanted to share a few of the more interesting responses.
On length: Trump’s definition of victory is unclear. The most likely scenario is the decapitation of the leadership, which occurred within minutes of the start of the conflict, and the denigration of Iran’s ability to project a threat beyond its borders. Complete elimination of the nuclear capabilities will require boots on the ground. A second scenario woud be for Trump to seek out an alternate leader of the regime who would negotiate a deal, similar to what occurred in Venezuela. The third scenario involves regime change, but Sir Alex indicated he sees little covert activity in trying to create conditions for a revolution. (But would he say otherwise?!?!)
On Energy: both sides have been careful not to target energy infrastructure, aside from a rogue, random missile launch at Saudi Arabia. Sale of oil to China accounts for 80% of Iran’s government revenues and is viewed as existential. But war is chaos and unexpected things happen.
On Trump’s offer to indemnify commercial carriers and offer military escorts: “with this much metal flying around, it’s just not going to happen.”
The chart on the right provides some insight into what the market is expecting. The navy line shows the price of oil, as of 2/23, for immediate and future deliveries. The grey line shows the same pricing, as of 3/3. After the initial shock, prices begin to normalize after May, suggesting the disruption may last only a few weeks. The situation is fluid (pun intended).
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