Hormuz: Strait of conflict
| Photo Credit:
Amr Alfiky
The US unilateral declaration ending “Operation Epic Fury” marks a clear inflection point in the recent Iran-US confrontation — but not its conclusion. Framed by US Secretary of State Marco Rubio as a successful completion of the offensive phase, the move reflects a tactical recalibration rather than a strategic resolution. Markets may interpret this as de-escalation, but the underlying geopolitical currents suggest a far more complex and unresolved landscape.
At a narrow level, Washington can credibly claim tactical success. The campaign appears to have significantly degraded Iran’s conventional military capabilities — missiles, drones, naval assets, and air defences. Such outcomes, however, must be contextualised. In asymmetric conflicts, a superior military power achieving battlefield dominance is expected rather than decisive. The more important question is whether these gains translated into durable strategic outcomes. On that front, the answer is far less convincing.
Advantage Iran
Crucially, the political architecture in Tehran remains intact. Despite leadership losses and military setbacks, the Iranian state has demonstrated resilience, continuity, and the ability to reconstitute authority. There has been no regime change, no systemic collapse, and no meaningful concession on core strategic issues — especially the nuclear programme. In fact, Tehran’s posture suggests the opposite: a reinforcement of hardline positions under pressure.
This is where the narrative battle becomes significant. Iran has framed the US decision to end offensive operations as a retreat — an implicit acknowledgment that Washington could not impose its will. While this may be rhetorical, it is not entirely without substance. The absence of Iranian capitulation, combined with the US shift to a defensive stance, lends credibility to Tehran’s claim of a “moral victory.” In geopolitical contests, perception often carries as much weight as battlefield outcomes.
Nowhere is this ambiguity more evident than in the Strait of Hormuz. Iran’s continued ability to influence, disrupt, or condition access to this critical artery of global energy trade remains a powerful lever. Even without formal closure, the imposition of risk — whether through vessel tolls, selective disruptions, or implied threats — can materially impact oil flows and pricing. Control, in this context, need not be absolute to be effective.
Economic impact
From a market perspective, the immediate reaction is likely to be constructive. The cessation of active hostilities reduces the near-term uncertainty premium, supporting risk assets and tempering volatility. However, this relief may prove transient. Tehran has not endorsed the US declaration, and the absence of a formal, mutually agreed settlement leaves ample room for miscalculation and renewed escalation.
Oil markets, in particular, remain exposed. Structural damage to supply infrastructure, combined with precautionary demand — countries rebuilding or expanding strategic reserves — could keep crude prices elevated. A range of $90-100 per barrel appears plausible in the near term, especially if Iran leverages its geographic advantage to manage supply flows. For energy-importing economies like India, this translates into renewed pressure on inflation, corporate margins, and fiscal balances.
Beyond the immediate, the episode must be situated within a broader geopolitical and geo-economic transition. The Iran confrontation is not an isolated event but part of a larger pattern reflecting the gradual erosion of US unipolar dominance. The interplay between the US, China, and Russia is reshaping global alignments, trade flows, and financial systems. Efforts to contain China technologically and economically, alongside emerging discussions around de-dollarisation, point to a more fragmented and contested global order.
In this context, the limits of American power are becoming more visible. Military superiority remains overwhelming, but its ability to translate force into lasting political outcomes is increasingly constrained. The Iran episode underscores this gap. It also highlights the growing role of regional actors and alternative alliances in shaping outcomes that are not fully aligned with US objectives.
Looking ahead, geopolitics is likely to remain a persistent “fat tail” risk for markets. The end of Operation Epic Fury reduces immediate tensions but does not eliminate the structural drivers of conflict. The absence of a comprehensive diplomatic settlement, continued disagreements over nuclear and regional issues, and the strategic importance of energy routes ensure that volatility will remain embedded in the system.
In sum, what we are witnessing is not the end of a conflict, but a pause within a longer cycle of contestation. Markets may enjoy a short-term bounce as uncertainty recedes, but the underlying risks — energy disruption, geopolitical fragmentation, and shifting power balances — are far from resolved.
The writer is CEO and Co-Head of Equities & Head of Research, Systematix Group. Views expressed are personal
Published on May 8, 2026