Iran: The Endgame
Iran's protests are getting out of hand, with increased evidence of militarisation, while the USA prepares for a military strike
Trump’s statements promising Iranian protesters that help is on the way suggest that American strikes on Iran are incoming, likely with the aim of decapitating the regime. Supreme Leader Ayatollah Ali Khamenei himself may be targeted, leading to widespread Iranian retaliation against American bases, but likely remaining within “rules of the game”. Escalation is especially likely given Reuters reports that the Americans are evacuating non-essential staff from Qatar’s Udeid Airbase. There are reports, as of yet unconfirmed, claiming that foreign agitators are present and are armed, targeting Iranian security forces. These are coming from Israeli media.
Scenarios
Our view is that there are three main scenarios:
Elements of the regime accept that it is over, and choose to make a deal with the Americans, after two to eight weeks of fire exchanges. This may follow the death of Khamenei, perhaps through a US airstrike.
A widespread civil war, with spillover risks to Iraq. The USA would provide air cover for the regime’s rivals, and take out its central nodes, while its missiles and drones target American bases for as long as they can.
The regime survives as an Islamic Republic, but severely bloodied and weakened, with a risk of new unrest rounds, ethnic conflicts, and renewed strikes. It may eventually seek a deal, after Khamenei’s death, or fall, due to continuous pressure.
Our view is that a deal (Scenario 1) is more likely than chaos. This is not Iraq that Iran will be fighting against, requiring eight years for Khamenei to “swallow the poison” of making peace. The regime is exhausted. There has been a significant protest wave every year since 2016, except for 2024. The Islamic Revolution has lost. Although Shi’a often chant “Death over humiliation”, they have shown in Lebanon that they adapt to new realities, as we saw with Hezbollah’s humiliating ceasefire agreement and its acceptance of continuous Israeli strikes.
If we are wrong, and the Iranians choose a suicide option (Scenario 2), then this may be a long war until the IRGC is decapitated and the missile stockpiles are destroyed or exhausted.
The usefulness of scenarios is in exploring the different possibilities. In reality, it is often the case that what happens is a blend of scenarios. For a deal to happen, a high level of violence is required. The Americans may choose to normalise waves of attacks against Iran, intended to push the leadership into accepting that it is helpless against the USA, to push it into an eventual deal. This would lead to spikes in risk affecting energy, aviation, and shipping, without this turning into an all out war on these assets comparable to Russia-Ukraine.
Impact
Scenario 1:
Shipping: the American navy stays out of the Gulf, and the Iranians do not deploy their speedboats and anti-ship missiles, or do so towards American ships in the Indian Ocean.
Aviation: American airstrikes and Iranian drone and missile strikes disrupt the airspace over the Gulf, with bases in Iraq, Jordan Qatar, the UAE, Kuwait, Bahrain, and Oman attacked. Israel is also regularly attacked.
