Market Commentary

Observations on the Iran Conflict

By Rob Sigler, MBA

March 5, 2026

Below, we outline our thoughts on the joint US and Israeli strike on Iran.  Our goal is to deliver an objective evaluation of what has transpired in addition to offering our thoughts on how this impacts capital markets and economic conditions.  We acknowledge that it is almost impossible to disentangle the political narrative that inevitably follows a decision to pre-emptively invade a sovereign nation and recognize that political leaning will influence how different people perceive this operation.

Thus, instead of ignoring these issues, we begin by putting them in plain view.  Many argue that the Executive Office overreached its authority.  Congress holds the singular authority to make a declaration of war, not the President of the United States.  Clearly, this operation is in the grey area.  Second, many are frustrated that the United States didn’t spend adequate time negotiating a diplomatic solution towards denuclearization before resorting to an attack.  We are less receptive to this argument, noting that many U.S. and foreign administrations have worked tirelessly on this path with little success.  Third, the United States didn’t make enough of an effort to build consensus amongst allies. The lack of communication between the administration and the United Nations creates a further relationship rift between the U.S. and its allies.  We acknowledge this to be true.  Fourth, the lack of pre-communication between the Administration and Congress and the American people creates a lack of unity and lack of understanding about our motivations for embarking upon this conflict.  To that point, based on immediate polling, only 27-32% of Americans support the military action in Iran.  This raises the possibility of fractured trust, more contentious political rhetoric, and a more chaotic midterm election season.

With that said, let’s turn the page to what happens from here.  Operation Epic Fury began February 28, 2026, with a surgical strike on Iran’s leadership, the Islamic Revolutionary Guard’s command and control apparatus, air defense and naval weaponry, as well as airfields, missile and drone launch sites.  The questions that we need to ask ourselves from here are whether the operational objectives of the mission can be accomplished.  Namely can the United States and Israel defeat the Iranian military?  Can we effect regime change in Iran?  Can we effectively remove the threat from nuclear development and ballistic missiles?  Can we avoid this conflict spreading into a much larger regional war?  And finally, can we accomplish the mission quickly enough to avoid economic fallout from energy and shipping dislocations?

In our estimation, the operational goals of this mission are very achievable.  Namely, the United States has the ability to destroy Iran’s military establishment.  In less than one week, we have effectively removed Iran’s air defenses.  We have largely destroyed their naval fleet.  We have destroyed the majority of their missile strike locations.  Finally, we have dramatically weakened their ability to counterstrike.  To wit, missile and drone attacks by Iran are down over 70% since the commencement of hostilities.

Regarding our ability to effect regime change, the results thus far signal that this is one of the most remarkable achievements of defense intelligence ever conducted and a stunning tactical win.  In a single day, US and Israeli forces managed to eliminate the bulk of Iranian leadership.  Presumed killed in the first day include 40-plus top administration officers including the Supreme Leader Ayatollah Ali Khamenei, the Commander of Revolutionary Guard Ground Forces, the Minister of Defense and Armed Forces, the Chief of Staff of Iranian Armed Forces, the heads of his various intelligence and security forces, as well as the top nuclear technology development officer.  While their leadership is presumably deep, we have removed key personnel and severed their communication lines.  Meanwhile, the Israelis are targeting the Basij, a force used by the regime to suppress public protest in Iran.

This is vitally important as we know that the Iranian people strongly object to this government.  This is a very intelligent, and largely secular, population.  Roughly 50% of citizens over the age of 25 have some form of higher education.  Over 80% opposed the Islamic Republic system in a poll administered by Netherlands-based, Gamaan Institute, in 2024.  They cited violent suppression of dissent, an ongoing economic crisis, and a sincere desire for a new, secular, and democratic government.  With such a disenfranchised majority hoping for change, one would hope that this would enable a revolt against the remaining regime stalwarts.  Additionally, freed from their oppressors, one would hope that the disaffected would assist with intelligence gathering, allowing our forces to navigate the country destroying the vestiges of the nuclear establishment and the ballistic missile program.

As for this devolving into a broader Middle East war, we strongly disagree.  In fact, we see it the opposite way.  Instead of coalition building amongst their Arab neighbors, Iran lashed out at countries they perceive to have aided and abetted the United States.  They launched strikes on assets within Saudi Arabia, Iraq, UAE, Oman, Qatar, Kuwait, Jordan, Lebanon, Bahrain, Turkey, and Cyprus.  Rather than creating a coalition of support, they seem to be alienating everyone in the region.

Finally, the duration of this conflict matters.  Roughly one-third of the world’s oil supply is produced in the Middle East.  Making matters worse, the largest producers, Saudi Arabia, Iraq, Kuwait, and the UAE ship most of their oil out of the Persian Gulf.  To exit the Persian Gulf, shipping companies must navigate the Strait of Hormuz, a relatively thin waterway separating Iran and the UAE.  While Iran’s control of this waterway has been greatly exaggerated, and their naval fleet severely handicapped, the region is still a theater of war.  Insurance companies won’t insure passage of these ships.  Furthermore, traversing from the Arabian Sea through the Gulf of Aden and up through the Suez Canal requires passing the tip of Yemen, a stronghold for the Houthi rebels that are financed by Iran.  Oil shipments will likely have to travel a much more lengthy and costly path to avoid this geography.  Thus, it is no surprise that oil prices have risen.  West Texas Intermediate (WTI) crude oil is up roughly 15%, to $75/barrel, since the attack commenced.  However, that reaction pales in comparison to some other oil spikes we have seen after geopolitical events.  For reference, Russia’s invasion of Ukraine in 2022 saw WTI spike from $92 to $130.  Why is this spike less substantial?  Traders obviously don’t see this conflict lasting a long time.  They think the United States will prevail in taking control of the Strait of Hormuz and neutralizing the Houthis as well.  What are the economic consequences if it goes higher?  A $15 rise in crude will push inflation up by roughly 0.2%.  A $50 rise from here would push it up nearly 1%.  Every $10 rise in oil prices depresses GDP by roughly 0.13% (Source, Apollo Capital Management, Goldman Sachs).  In other words, if the conflict is resolved quickly, the economic damage is minor.  If it is sustained or escalates, the problem could magnify.  Our sense is that it will be short.

While we agree that this administration did a poor job of communicating its motives for this strike to the American public and failed to consensus build amongst its allies, we don’t think there is much debate about the track record of the Iranian government.  In addition to violently suppressing their populace, Iran is the largest financier of global terror in the world.  They arm and support Hamas, Hezbollah, the Palestinian Islamic Jihad, the Houthis in Yemen, and multiple militias in Iraq and Syria.  The Iranian leadership controls roughly 20% of all assets in Iran.  Those massive oil revenues, despite severe sanctions, allow them to subsidize insurgents all over the Middle East.  To argue that the Middle East is not a safer place without them is naive.  Admittedly, America’s track record of regime change is poor and the list of failed examples long.  While we are effective at removing leadership, we have been quite poor at effecting stable, democratic establishments post incursion.  Will another oppressive regime take hold of power in this vacancy?  It’s nearly impossible to know, but not farfetched to assume.  Will this inspire sympathetic terror attacks on U.S. interests?  That is quite possible.  However, when we view the entire scope of this mission, we believe the objective of obliterating Iran’s nuclear ambitions and capturing their store of ballistic missiles is achievable.  We believe the next regime, even if corrupt, would be hesitant to embark upon the same path knowing the potential to be targeted for further intervention.  Our sense is that this conflict will be resolved in relatively short order and that the economic consequences will be manageable.

Where does that leave us?  Does that mean Westshore Wealth is embracing this downturn and adding equity exposure?  The answer is no.  We entered 2026 with a cautious view.  It had nothing to do with any premonition of this Iranian conflict, but rather, other issues.  As you may recall from our piece, Krazy Times, https://westshorewealth.com/krazy-times/, our caution was driven by concerns that U.S. economy is imbalanced and too reliant upon the high end consumer and the Artificial Intelligence capital expenditure boom to drive it.  We worry about deteriorating consumer credit at the lower income cohort levels.  We worry about the ongoing issues related to non-bank lending firms.  We worry that the midterm election cycle will bring considerable uncertainty.  Finally, it concerns us that despite all those worries, the market commands a lofty valuation multiple only seen in 1% of all outcomes.  Thus, while we believe the Iranian conflict will be resolved favorably, we remain cautious on the U.S. market.

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