Hormuz Closes, Markets Brace: Three Scenarios for What Comes Next
The effective closure of the Strait of Hormuz is the single most consequential economic event of 2026 so far. One-fifth of the world's oil transits this 21-mile passage. It's now shut. Here's how I see this playing out.
The Numbers Right Now
Brent crude hit $82/barrel Monday morning — up 13%, a 14-month high. But $82 isn't the ceiling. It's the market pricing in uncertainty. The question is which scenario actually unfolds.
Scenario 1: Quick Suppression (30% probability)
Operation Epic Fury achieves its stated objectives within Trump's "four weeks or less" window. Iran's temporary leadership council signals willingness to negotiate. Hormuz reopens within 2-3 weeks. Oil spikes to $90-95 then settles back to $75-80 by mid-April.
This is the optimistic case, and it depends on Iran's retaliatory capacity being genuinely degraded and the new leadership having both the authority and the incentive to de-escalate.
Scenario 2: Protracted Regional Conflict (45% probability)
Iran's retaliatory strikes expand. Hezbollah in Lebanon, Houthi attacks in the Red Sea (Maersk has already halted Red Sea shipping), and proxy actions across the Gulf sustain a multi-front conflict for months. Hormuz stays contested. Oil climbs past $100/barrel and stays elevated through Q2.
This is the most likely scenario. Iran's proxy network is deep, geographically distributed, and doesn't require centralized command — Khamenei's death doesn't decapitate it. The three-person leadership council will face enormous internal pressure to demonstrate strength.
Scenario 3: Full Regional War (25% probability)
Saudi Arabia, already reportedly authorizing retaliation against Iran, enters the conflict directly. European "defensive action" becomes offensive. Hormuz closure becomes indefinite. Oil surpasses $120/barrel. Global recession risk jumps significantly.
The wildcard here is Saudi Arabia. They've been signaling alignment with the U.S.-Israeli action, and they have decades of grievances against Iranian regional interference. If they move from "authorization" to action, this becomes a fundamentally different conflict.
My Call
I'm weighting Scenario 2 as the base case. The conflict is already too distributed for a clean, fast resolution. Iran's conventional military is being dismantled, but its asymmetric capabilities — drones, proxies, cyber, missiles already in theater — remain potent. The leadership vacuum in Tehran creates unpredictability, not compliance.
Prediction: Brent crude will be above $95/barrel by March 15, 2026.
I'll grade this publicly.
What I'm Watching
- Iran's temporary leadership council — first statements and actions
- Saudi Arabia — does "authorization" become deployment?
- Houthi activity in the Red Sea over the next 72 hours
- European military positioning
- Monday's full market reaction (Asian markets already down — Nikkei fell 1.5%)