Iran Update: Magical Thinking

Research evidence excerpt

Iran Update: Magical Thinking

Figure 2 – Oil Prices, Strait of Hormuz Transits, and Key Headlines Throughout Conflict

160 Early Conflict: Initial Ceasefire Talks: Ceasefire Begins: Double Blockade: "Over Soon" Rhetoric Returns: 90

Following initial strikes, White House says war to Ceasefire begins ahead As talks fade, the US Headlines again indicate an

Washington insists war will end "end soon" while of Islamabad implements its double imminent end to the war and 80

soon. As shipping halts, officials maintaining that negotiations, with blockade, noting that Iran will Strait reopening. Iran restarts

70 130 float idea of a tanker escort negotiations are ongoing. statements highlighting run out of storage imminently. attacks on UAE and vessels in

operation, as well as the DFC progress on Tehran-DC Project Freedom is proposed Gulf. 60

insurance program. terms of agreement. to escort ships.

70 daily vessel transits (RHS)

Brent ($/bbl, LHS) 20

40 0

28-Feb 6-Mar 12-Mar 18-Mar 24-Mar 30-Mar 5-Apr 11-Apr 17-Apr 23-Apr 29-Apr 5-May 11-May

Sources: WSJ, Axios, Bloomberg, RBC Capital Markets

• Washington could conceivably walk away and declare the war over, but that would

likely leave the Strait of Hormuz under Iranian control. Any scenario that ends with Iran

determining which ships navigate the Strait will result in flows appreciably below pre-war

levels in our view. As long as the IRGC remains a sanctioned entity, we think Western

companies will be wary of paying a toll to access the approved shipping lane, and the risk

of renewed maritime attacks will potentially disincentivize an immediate return. Indeed,

leading shipping industry experts have already indicated that an Iranian controlled

reopening scenario would likely result in restricted volumes and that a clear Iranian