Overview
BCA Research, in a recent note, warned that the confrontation involving Iran is likely to re-escalate later this year, placing a 70% probability on renewed hostilities over the next 12 months. The assessment holds even if oil shipments through the Strait of Hormuz begin to move again in the near term.
Geopolitical strategy and recent incidents
According to BCA's chief geopolitical strategist Matt Gertken, Iran has extended the closure of the Strait of Hormuz for longer than BCA expected. The firm interprets Tehran's behavior as a deliberate approach designed to keep oil prices "uncomfortably high" while appearing to engage in negotiations without fully committing to them. BCA cited what it described as a "small spate of attacks against shipping on April 26, and refusal to negotiate while clearly negotiating" as consistent with that strategic pattern.
U.S. response and the nuclear impasse
In reaction to Iranian actions, the United States has implemented a naval blockade intended to pressure Tehran to abandon its nuclear program. BCA identified the nuclear dispute as the principal obstacle to a sustainable ceasefire. The firm argued that the only plausible short-term arrangement that could be struck is reopening Hormuz in return for lifting the blockade, with formal nuclear negotiations deferred. BCA characterizes such a swap as unsustainable over the longer term.
Prospects for a ceasefire
Gertken warned that even if a substantive ceasefire is secured in the coming weeks, it carries significant risk of unraveling. He wrote that any immediate cessation of hostilities "will be counteracted later by 60% chance of failure due to the difficulty of a new nuclear deal."
Market positioning and investment stance
On investment strategy, BCA said it is exiting some bullish trades that were predicated on ceasefire expectations, taking modest gains. At the same time, the firm remains long U.S. energy equities, noting those positions have appreciated 5.6% since April 15. BCA also is reestablishing a long position in global defensives versus cyclicals and prefers Australian equities relative to emerging Asian markets, citing Australia’s exposure to natural gas and coal as a supporting factor.
Note on limits of the analysis
The note confines its conclusions to the scenarios and probabilities it sets out, identifying the nuclear negotiation as the major source of uncertainty for any durable resolution.