This Special Report is based on a client note from advisory firm Frans Cronje Private Clients. It sets out how the war in Iran may unfold via six potential scenarios and examines the implications for global markets, oil flows, geopolitics, and the balance of power in the Middle East and beyond. What follows recasts that analysis as a long narrative essay for this Special Report, exclusive to The Common Sense, tracing the early stages of the war, the strategic calculations driving it, and the possible pathways through which it may evolve.

War rarely unfolds in a straight line. Even the most carefully planned campaigns drift as events collide with expectations. The conflict now unfolding around Iran and the Strait of Hormuz is a vivid illustration of that truth. It began with limited military strikes designed to force concessions. Within weeks it had become the focal point of the most consequential geopolitical chess game in the world economy. For investors, knowing how it all ends is now the most important piece of market intelligence in the world.

Three weeks before the present escalation, the firm warned that the confrontation between Washington and Tehran was approaching a decisive point. The United States (US) had set a rough deadline for Iran to address concerns over its nuclear and missile programmes. If Tehran did not move, limited strikes were expected to follow.

The reasoning was straightforward. Failure to act would have damaged American credibility after a series of public warnings. There were outside odds of those initial strikes bringing an end the matter quickly. But, and as things have turned out, they were likely to mark the beginning of a wider campaign designed to degrade Iran’s military capabilities and force a strategic recalculation in Tehran.

The expectation was that if Iran did not immediately move to negotiate, the conflict would enter a second phase lasting two to three weeks. That phase would consist primarily of air and naval strikes targeting military infrastructure, missile facilities, and strategic installations. The goal would be to weaken Iran sufficiently that it would either accept negotiations or face a longer period of military pressure.

Even before the first missiles were fired, the economic implications were easy to anticipate. Oil prices would surge. Safe-haven assets such as the dollar and gold would attract investors. Shipping routes through the Gulf would become uncertain, forcing trade to divert around southern Africa. Logistics costs would rise as companies scrambled to adjust to new risks.

Three weeks later, those predictions have largely materialised.

The dollar index has strengthened by roughly 3.0%, reflecting investor demand for safe assets. Oil prices have surged by nearly 42.0%, one of the sharpest short-term increases in recent years. The Dow Jones Industrial Index has lost over 5%. Gold has fallen by approximately 6.0%, not as counterintuitive as it seems when its recent break through the $5 000 ceiling is considered. Global logistics costs have climbed sharply, while shipping traffic around the Cape of Good Hope has increased as companies seek alternatives to the increasingly uncertain Gulf routes.

The military trajectory of the war has also broadly followed early expectations. Iranian offensive capabilities have been significantly degraded. The pace of missile and drone strikes has fallen markedly. The initial shock phase of the conflict appears to have passed.

It is useful again, as the three-week mark is reached, to consider how American strategists thought about the war from the outset.

The objectives were clear enough. Halt Iran’s nuclear programme. Halt its ballistic missile development. Reduce or eliminate its support for regional proxy groups. And potentially gain influence over the flow of oil through the Gulf – in order to gain some strategic leverage over China in the struggle for parity in the Indo-Pacific.

Within Washington three possible end states appear to have been contemplated.

The first is that under extreme pressure the Iranian regime might fracture, street protests occur, and a popular government, or something near that, come to power. A second was that a rival military leadership could have emerged willing to negotiate on terms satisfactory to Washington. A third was that sustained bombing might be successful enough that even without seeing a satisfactory change of government the Iranian nuclear and missile infrastructure would have been set back more than a decade, which would, in and of itself, have been a win for Washington.

What has occurred is that the Iranian Revolutionary Guard Corps (IRGC), as opposed to the broader military, consolidated power and installed Mojtaba Khamenei as the country’s new leader.

That consolidation prevented the collapse of the Iranian state, a development that, while delaying, for the present, a transition to a more compliant regime, has also prevented the wider regional war involving proxy militias and neighbouring powers that a leadership vacuum might have enabled.

The focus of the conflict has therefore shifted toward the narrow maritime corridor through which a large portion of the world’s oil supply flows.

The Strait of Hormuz is only a few dozen kilometres wide at its narrowest point. Yet it carries roughly twenty million barrels of oil each day. Global petroleum consumption stands near one hundred million barrels per day. Around seventy-five million barrels are transported by sea. That means more than one quarter of the world’s seaborne oil trade passes through this single stretch of water.

Few locations in the world economy carry such strategic weight.

Iran understands this perfectly. Its strategy has therefore centred on threatening disruption in the Strait as a means of imposing economic pressure on the US and its allies, while the possibility that the Strait might be mined or targeted by advanced anti-ship missiles has been enough to send shockwaves through global markets.

American officials insist that their navy will be able to escort vessels safely through the Strait by the end of the month. Yet the technical challenges remain considerable.

Anti-ship missiles have become increasingly sophisticated. Mines can be deployed quickly and cheaply. Clearing operations can never guarantee absolute safety. Even the suspicion that a single mine remains undetected can cause tanker traffic to halt entirely.

For Washington the stakes could hardly be higher. If an American warship were crippled or sunk while escorting commercial vessels through the Strait, the political consequences at home would be severe. Yet allowing the Strait to remain closed carries its own political costs. Rising oil prices translate rapidly into consumer price pressures for American voters – just more than six months out from the midterm elections.

The strategic dilemma is therefore clear. A rapid American withdrawal from the conflict would ease immediate economic pressure but would hand Iran a powerful new geopolitical weapon. Tehran would have demonstrated that it can disrupt global energy flows whenever it chooses.

Such leverage would extend far beyond the current conflict. It would allow Iran to exert continuing influence over Gulf oil producers and the wider global economy.

There is another complication. Iran is believed to possess roughly two hundred kilogrammes of enriched uranium. Securing or destroying that material is central to the American objective of halting Tehran’s nuclear ambitions.

Ending the war without addressing that issue would leave the underlying strategic problem unresolved.

For the moment Washington appears to be balancing competing pressures. Some Iranian oil shipments bound for Asian markets may have been allowed to pass through the Strait. The apparent aim is to reduce pressure on global oil prices while discouraging Iran from mining the Strait.

Behind these tactical manoeuvres lies a much larger geopolitical contest.

Roughly 20.0% of China’s oil imports currently pass through the Strait of Hormuz. If the US were able to secure control over that route it would gain substantial leverage over China’s energy supply chain and therefore over the broader balance of power across the Indo-Pacific.

Now, three weeks into the war, and with America’s strategic objectives still unmet, it is useful to look towards a longer horizon to consider how it may all play out. The six scenarios that follow were sketched after extensive reading and research. The first five explore avenues that see the war conclude within a shorter rather than a longer timeframe. In each of these cases various tactical successes, short of an expanded ground war, bring the thing to an end. In scenariosix, however, this report explores what happen if those tactical approaches fail and the war must ultimately be decided by troops battling it out on the ground.

The First Scenario: Direct Operational Solution

This scenario assumes that the US successfully neutralises Iran’s missile systems and mine threats and reopens the Strait of Hormuz under naval escort. The Strait, which carries approximately one-quarter of global seaborne oil, would once again become the critical link in global energy trade. With the naval escort in place, tanker traffic would resume, and the geopolitical stability of the region would be temporarily restored.

However, this “direct operational solution” is not without its complications. First, neutralising Iran’s missile systems and mines is no small feat. While the US Navy has advanced capabilities in missile defence and mine detection, Iran’s military has also adapted rapidly, deploying more sophisticated anti-ship missiles and laying mines that are both highly effective and difficult to detect. The process of clearing the mines and ensuring the safe passage of commercial vessels through such a contested waterway could take months, not weeks.

Moreover, the operations would likely be met with Iranian retaliation. Iran has the ability to target not only military assets but also key regional oil infrastructure, including pipelines and refineries in Saudi Arabia and other Gulf nations. In this scenario, Tehran would not simply back down; it would likely target key assets in neighbouring countries that are vital to US and regional economic interests. Washington would also have to contend with the continued threat of Iranian proxy groups, which could escalate tensions across the region, including in Iraq, Syria, and Yemen.

Even if Washington were able to escort vessels through the Strait safely, the political ramifications would be substantial. Iran’s leverage, while temporarily diminished, would not disappear. Tehran would still hold a powerful card – the ability to disrupt oil flows again in the future, should it choose to escalate. This could shape future US policy toward Iran, with increased military investments and regional presence likely. Furthermore, the political cost of a protracted military engagement would be significant. The US would need to maintain a long-term presence in the region to safeguard the Strait, which could drain resources and erode domestic support for the conflict. Thus, even in the case of a "strategic victory", the global economic and military costs of such an outcome could be far-reaching and enduring.

The Second Scenario: Strategic Withdrawal

Faced with mounting economic pressure and operational difficulties, Washington could choose to exit the conflict without securing the Strait of Hormuz. Such an outcome would represent a significant strategic success for Tehran, as Iran would have successfully resisted US pressure while maintaining control over its most vital economic and geopolitical asset – the ability to disrupt global oil flows.

A strategic withdrawal would, of course, come at a high cost. While it might relieve immediate pressures on the US economy – particularly with oil prices likely falling and inflationary pressures easing – it would deal a severe blow to American credibility. The US would be seen as unable to fully exert its will in the Middle East, and Iran would have demonstrated its capacity to influence global energy markets at will. The implications for US influence in the broader Middle East would be profound. Allies in the region, such as Saudi Arabia, the United Arab Emirates, and Israel, might lose faith in Washington’s ability to protect their interests. China too, with its eyes on Taiwan and Australia, would take the lesson to heart, more assured than ever that its efforts to secure dominance in the Indo-Pacific will succeed.

Moreover, a US withdrawal could embolden Iran and its allies. Tehran could attempt to expand its influence across the region, further undermining American interests in countries like Iraq, Syria, and Lebanon. It could also use the leverage it gained from the conflict to push for a broader regional restructuring – perhaps driving a wedge between Gulf Co-operation Council states and the US, which could have long-term implications for both the region and global energy markets.

There is a variant of this second scenario where Washington could exit after achieving its central objective – seizing or destroying Iran’s enriched uranium stockpile. In this scenario, the US could declare victory and withdraw, as it would have successfully neutralised the primary threat posed by Iran’s nuclear ambitions. The destruction or securing of the uranium would potentially prevent Iran from advancing to weapons-grade nuclear material, while leaving the broader conflict unresolved. This approach might minimise the need for prolonged military engagement, but it also carries the risk of leaving Iran’s other destabilising activities intact, including its missile programme and support for regional militias. It could be a short-term tactical win for Washington, but a longer-term strategic loss if Iran’s regional influence is allowed to persist unchecked.

The Third Scenario: Leadership Decapitation

The third scenario revolves around the removal of Iran’s current leadership, particularly the consolidation of power by Mojtaba Khamenei, and the emergence of a more pragmatic, if not pro-Western regime (at the very least one willing to accede to the nuclear and missile concerns). In the chaotic aftermath of the conflict, a new leadership might rise from within the Iranian armed forces or even from reformist factions within the government. This new leadership could promise to dismantle Iran’s nuclear programme in exchange for international recognition and relief from economic sanctions.

If the Iranian leadership were decapitated – either through an internal coup or external pressure – it could present a pivotal opportunity for Washington. The US could work with the new leadership to broker a peace agreement that includes strict limitations on Iran’s nuclear programme, missile development, and regional activities. Washington would likely present this as a major diplomatic victory, having achieved its primary objectives without the need for a prolonged military occupation.

However, this scenario is fraught with uncertainty. The nature of Iran’s political system – an amalgamation of theocratic rule and military influence – means that the removal of the Supreme Leader does not guarantee the emergence of a Western-friendly government. The Iranian state is highly resilient, with the military and religious factions deeply entrenched. Even if a more pragmatic leadership emerges, it might struggle to gain the trust of the Iranian people, particularly if it is seen as compromising too heavily with the West. The internal instability that would follow could create new avenues for conflict, as Iran’s entrenched hardliners could resist any moves toward peace, potentially plunging the country into further turmoil.

Moreover, the idea of a peaceful, negotiated resolution to the conflict could be elusive. Even if a more pragmatic government comes to power, it may still face immense pressure from its own military, the IRGC, and its regional allies, such as Hezbollah and Hamas, to maintain Iran’s military capabilities and confront the US directly. This scenario, while appealing, may only offer a temporary respite rather than a long-term resolution.

The Fourth Scenario: Controlled De-Escalation by Iran

In this scenario, Iran recognises the economic and political toll of the conflict and opts for controlled de-escalation. Tehran might allow larger volumes of oil to pass through the Strait of Hormuz, stabilising the global market and alleviating some of the pressure from rising oil prices. By doing so, Iran could preserve its revenue stream while also reducing the likelihood of further military escalation.

Such a decision could be motivated by several factors. Iran may wish to mitigate the economic damage caused by the conflict, as it faces crippling sanctions and the potential collapse of its economy. Additionally, Tehran might calculate that maintaining its leverage over oil flows allows it to preserve its ability to shape global energy markets in the future, even if it has to de-escalate temporarily.

However, controlled de-escalation would not mean an end to Iran’s regional ambitions. Even as it allows more oil to flow, Tehran would likely continue its proxy wars across the Middle East, using militias and allies to exert pressure on US interests in Iraq, Syria, and Yemen. This would provide Iran with a way to continue exerting influence without the immediate threat of military retaliation from the US. Furthermore, Iran would continue to develop its missile programme, even if it temporarily halted operations in the Strait of Hormuz.

For Washington, this scenario would represent a delicate balancing act. While it would relieve immediate pressures on global oil prices and reduce the risk of an all-out regional war, it would leave Iran’s broader strategic ambitions largely unaddressed. It would also raise questions about the efficacy of US military action if Iran were able to secure a favourable outcome through diplomacy and limited concessions. The longer-term geopolitical consequences of such a deal would need to be carefully managed to prevent Iran from reasserting itself in the future.

The Fifth Scenario: Structural Circumvention

The fifth scenario involves the Gulf oil producers seeking ways to bypass the Strait of Hormuz altogether, reducing their dependence on this critical chokepoint. Several alternative routes could be developed, most notably through pipelines that link the Gulf to the Red Sea or the Arabian Sea. Saudi Arabia, for instance, has long sought to build pipelines that bypass the Strait, and recent infrastructure projects have attempted to lessen reliance on the waterway.

Such structural circumvention would not only reduce Iran’s leverage over the global oil market but also shift the geopolitical landscape of the region. The construction of new pipelines across Saudi Arabia or through Iraq and Türkiye would likely have significant ramifications for both the regional balance of power and the global energy market. If successful, these routes could replace up to one-third of the oil normally transported through Hormuz.

However, these alternatives are not without risks. Building new pipelines would require enormous capital investment and could take several years to complete. In the short term, their construction could increase regional instability, as Iran may retaliate by targeting infrastructure projects and pipelines in neighbouring countries. Furthermore, such bypass routes would not guarantee immunity from disruption; they could be vulnerable to sabotage or attacks by Iranian-backed forces, including militias operating in Iraq and Syria.

The creation of bypass routes would, however, shift the economic leverage away from Iran in the long term. If Gulf producers can establish reliable alternative transport routes, the strategic importance of the Strait of Hormuz could diminish, reducing the pressure on the global energy market.

These scenarios do not need to occur in isolation from each other. Elements of them may be combined. For example, if the threat of circumnavigation (scenario five) is seen as serious enough Tehran might pull the trigger of de-escalation (scenario four) and so on.

But what if none of these plays out? Then the assessment must move to scenario six, which is an entirely different creature altogether.

The Sixth Scenario: Regional War

If none of the above five scenarios occur, the war may shift into a ground phase involving special forces and regional militia (and even in specialised circumstances American marines) triggering a wider civil conflict within Iran.

Scenario six draws much of its impetus from work by Robert Pape from the University of Chicago, whose writing makes clear that air power alone has never been sufficient to bring down a regime.

Pape writes: "In war after war, cities have burned, infrastructure has collapsed, leaders have been targeted from the sky… yet no regime in history has fallen solely because it was bombed from the sky."

He explains that regimes collapse when "ruling coalitions fracture under internal pressure".

The pattern is always the same: "For elites to defect, they must believe two things… the ruler can no longer protect them, and an alternative authority can.”

“However, under foreign air attack … insiders who hand over … face a bullet in the head. Under those conditions survival binds them together … against the foreign power attacking the state."

For a regime to fall requires something quite different: “Systemic political disintegration driven by mass defeat.”

And mass defeat necessarily means a ground war.

If scenarios one to five do not unfold, a ground effort involving special forces and local militia (and even US Marines) may play out, leading to a long-term – certainly multi-month – conflict. This would likely result in sustained higher oil prices, a further strengthening dollar, rising interest rates, and sharp market losses.

Several existing regional militia groups could be employed in such a conflict, potentially leading to a regional civil war.

Such a war, similar to what occurred in Syria, it must be understood, would represent a strategic victory for the US in that it would halt Iran's nuclear investment and ballistic missile development, and shift the focus away from the destruction of Israel [The Common Sense is grateful to our friends at C5 Capital in London for this insight].

Additionally, as the war intensifies and the Iranian administration is perhaps pressed onto the back foot, the Strait of Hormuz may open, leaving China’s Iranian and broader Gulf oil supply open to throttling by the US – another key strategic objective of the war.

Also under scenario six, as the war intensifies, and the current leadership around the IRGC is challenged, as Pape suggests, a new internal military faction may seize power – and this would likely be welcomed if it acceded, as it likely would, to the nuclear, ballistic missile, and related US strategic objectives. The effect would be to cut the conflict off in mid-stream.

It is also plausible under scenario six that ground operations by militia and special forces might come across and then recover the uranium stockpile providing another potential mid-stream exit point.

However, should the war not be cut off mid-stream, and the Iranian administration disintegrate, implications as vast as Azerbaijan emerging as a global leader in the Shia faith could come into play – and enter into a strategic alliance to the US and Israel [we again thank C5 Capital for that uniquely valuable insight]. This outcome will weigh perhaps as heavily as anything else on the current, or a future, Iranian leadership.