The Strait of Hormuz is effectively closed. Insurance carriers have pulled P&I coverage for transit. Oil is spiking. The S&P 500 fell nearly 2%. Markets are pricing a 1979 replay.
We believe that comparison is wrong. The structural conditions that made 1979 what it was do not exist today.
In 1979, Khomeini had a movement, an ideology, and a population that overwhelmingly supported overthrowing the Shah's secular military government. The revolution replaced a military regime with a theocratic one on a wave of popular religious fervor.
Today the polarity is flipped. The theocratic regime is the old establishment. Iran's population under 40 is increasingly secular. There is no exile figure with a revolutionary movement. There is no mass ideological energy pointed at a new form of government. What there is instead is the IRGC: a deeply entrenched military and economic institution that has been the real power center for years and will almost certainly remain so.
There is no powerful constituency anywhere on earth that benefits from prolonged closure. Historical pattern: when regimes lose their central authority, the security apparatus consolidates and needs economic normalcy fast. Whoever controls the Hormuz coastline controls the most valuable chokepoint on earth, and the money available for cooperation dwarfs anything available from continued conflict.
Accidental escalation. A major tanker sinking or strike on critical infrastructure. IRGC hardliners who need to demonstrate strength before any pragmatist can pivot. US national security interests that diverge from rapid resolution. China using the crisis as leverage rather than pushing for speed. We believe this resolves, but we are less certain about how fast, and there is a meaningful probability our base case is wrong entirely.
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