The Iran Off-Ramp...

As the Iran conflict enters its third week with no ceasefire in sight, the de facto closure of the Strait of Hormuz has become the defining economic choke point of the war. Shipping traffic remains down 90-98% from normal levels, stranding roughly 20% of global seaborne oil and LNG flows and forcing producers into immediate shut-ins while Asian refiners slash runs by up to 30%. Goldman has already revised its forecast to assume the strait stays flat at ~15% capacity for another 5+ days before any gradual recovery, pushing Q2 Brent averages higher and underscoring that every additional day of disruption amplifies inflation risks across energy, fertilizers (now up ~1/3), and metals.

The Problem

The longer the war drags without an off-ramp, the more the initial oil shock metastasizes into systemic supply-chain collapse.

You can read a seriously deep dive on time-dependent fire and brimstone here, but here's a condensed timeline of global mayhem if this thing drags on; 

• Weeks: Sulphur/sulphuric acid shortages halting copper/cobalt mining, petrochemical feedstocks (e.g., polyester for apparel), and fertilizer production.

• 1–3 months: Grid/transformer shortages, semiconductor wafer scrappage (e.g., Taiwan LNG starvation), AI/data-center freezes, and voltage issues.

• Longer-term: Fertilizer inflation → food inflation → urban instability/"globalised Arab Spring"; hyperinflation from dollarized fuel hoarding; EM currency collapse, debt defaults, and sovereign spreads widening; industrial contraction in advanced economies; and a shift to autarky, export controls, and militarized trade blocs. 

Goldman, meanwhile, presents a couple of scenarios for your consideration, as we noted earlier Wednesday;

• Bullish view: Positioning is already light and hawkish policy is priced, so even a hint of ceasefire could spark a squeeze and relief rally. Best expression is long front-end government bonds; equities require thematic plays (peace baskets, HY credit) or positioning for lower rates as central banks move toward normalization.

• Muddle-through view: Markets drift in a stagflation-lite regime, shifting from inflation fears to growth concerns amid weakening fiscal support, softer labor markets, and tighter credit. Flows favor government bonds over credit and equities tilt to quality/defensives, with AI/Mag-7 still viable on earnings resilience.

• Bearish view: Commodities, particularly LNG, signal far more stress than equities, with Qatar supply risk creating potential energy shocks, bidding wars in Asia, and supply chain disruption. This drives de-grossing, high correlations, and broad equity downside; hedge risk and favor structural winners like European energy independence and gas exposure.

UBS sees oil rising to $150+ by the end of April if Hormuz remains closed. 

They also see inflation peaking close to 5% if Hormuz stays shut until the end of April:

The Off-Ramp

Three things are needed for an off-ramp to materialize;

• Mutual Agreement: Requires both Iran and Israel to agree; US alone cannot pivot unilaterally.

• Infrastructure Guarantees: Safe passage for vessels and protection of energy infrastructure (e.g., Strait of Hormuz).

• Political Cover: Leaders need conditions allowing them to claim a win domestically (e.g., ending hostilities vs. regime change).

According to NBC News, citing six anonymous government sources, "The off-ramps are built into daily war planning, along with options for escalation if the White House seeks to increase the pressure on Iran."

As JP Morgan's Brendan Henrici writes in the hilariously titled "How To Assemble A Taco," Trump folding inside of the next 2 weeks seems to be a foregone conclusion for the reasons above.

Trump has signaled that U.S. involvement may be nearing its conclusion, describing the strikes as “a little excursion” to neutralize nuclear threats and stating it “won’t be much longer… it’s moving along fast.”

This rhetoric tracks the Administration’s earlier 4-to-6-week timeline and is reinforced by the decision to delay his China trip by five weeks. Markets have begun pricing in a potential “TACO” - Wall Street shorthand for “Trump Always Chickens Out” - with consensus building for some form of ceasefire or victory declaration inside the next two weeks.

According to JPM, the narrow U.S. objectives outlined by Secretary of State Marco Rubio - destroying Iran’s navy, missile stockpiles, and production capacity - could provide sufficient grounds for the administration to claim victory and exit. However, the desk emphasizes that a clean TACO alone may not deliver lasting relief to oil prices. For any correction to prove sustainable, there must be credible line of sight to a lifting (or at least partial suspension) of Iranian sanctions, allowing more Iranian barrels back onto the global market. Without that step, traders believe any initial relief rally in energy prices would likely prove short-lived.

Significant questions remain about the durability of any such exit. Leaving Iran’s nuclear program largely intact while it has demonstrated the ability to weaponize the Strait of Hormuz could be portrayed as a strategic victory for Tehran. Enforcement also presents challenges in a fragmented Iranian power structure, although depleted missile inventories and the IRGC’s continued influence over factions may give central leadership enough leverage to enforce tanker traffic agreements.

Finally, even post-TACO, a new structural “strait premium” may linger in oil prices due to Iran’s proven leverage - unless offset by the much larger supply boost from unsanctioned Iranian exports.

Professional subscribers can read the full note at our new Marketdesk.ai portal