The coming strike on Iran
A large Israeli strike on Iran is increasingly likely, risking regime stability after Khamenei's succession
Commercial Summary: With Iran’s deterrence having collapsed, a US-backed Israeli attack on Iran is likely. Energy and nuclear infrastructure are likely to be among the list of targets. The survival of the Islamic Republic after Khamenei’s death is increasingly at risk. Iran will likely try to hold on to Iraq as much as it can, raising risks to Western and Turkish assets there. Iran will also have to decide whether it wants to target Gulf energy infrastructure and shut down Hormuz.
Iran’s regional deterrence has collapsed.
Hezbollah is thoroughly defeated - far more than we ever assessed was possible. The entire first, second and perhaps even third line leadership of the group, as well as hundreds of unit commanders and officers are dead. Hezbollah’s supply line through Syria is severed, and its missile stockpiles have been heavily reduced. Its deterrence capability, which it worked to build up gradually since 1993, has fallen apart.
Some key Iraqi Shi’a turned against Iran: Sayyid Muqtada al-Sadr and chairman of the Popular Mobilisation Units Faleh al-Fayyad both refused to send units to Syria to fight for Bashar al-Assad. Essentially, they would not back a weak Iran, even if they had to obey it when it was strong. They are unlikely to fully back it if it went to war with Israel or the US. Rather, they may try to restrict the response from fully pro-Iran Shi’a militias.
Billions of dollars that Iran spent on propping up regional proxies brought Iran no lasting advantage. Supreme Leader Sayyid Ali Khamenei’s defence and deterrence strategy was discredited, his life’s work reduced to ruins.
With Iran’s ability to deter Israel so severely weakened, and with Syria’s air defence, which supported Iran’s, decimated, Israel will press its advantage. It will not have such an opportunity again, and therefore striking sooner rather than later makes sense.
Commercial Impact
Since a strike on Iran may lead it to try to develop a nuclear weapon, the Israelis and the US will probably assess that they need to strike Iran’s nuclear infrastructure.
For an attack on nuclear infrastructure to succeed, the US may have to be directly involved, as the GBU-57/B massive ordnance penetrator may need to be used, and it can only be deployed from B-2 or B-52 jets, which Israel does not have. It is unclear if the US would make its participation overt, though Iran would assume that the US was involved.
To maximise the impact on the Islamic Republic’s stability ahead of Khamenei’s succession, the US and Israel are likely to also go after key economic targets, including energy.