Quick Bites | Who Wins This War?

Carl von Clausewitz, in “On War”, defines winning as compelling the enemy to fulfill your will through maximum application of force. Key principles for victory include concentrating on a decisive objective, maintaining audacious resolve, and integrating political aims with military action, rather than just occupying territory.

“War therefore is an act of violence intended to compel our opponent to fulfil our will”.

The Iranian theocratic regime’s will is not yet broken. Iran’s leadership has been decimated, its navy sunk, its missile batteries depleted, its nuclear facilities damaged, and its air force destroyed. Yet it still retains the ability to disrupt the global energy markets.

By blocking the Strait of Hormuz, Iran seeks to pressure President Trump to end the war prematurely, setting up an Iranian veto on energy flows and winning impunity in the future. Good strategy is the alignment of ends and means. By that standard, the Iranians have been effective. Lacking the ability to defend itself, Tehran has chosen to impose a high cost all around.

What happens next?

For Israel, the focus will be on the continued destruction of Iran’s military infrastructure and greater targeting of the Revolutionary Guards and its militia, the Basij force. The decimation of Iranian military power and resources is a victory for Israel, albeit an incomplete one.

For the US, the goal is to restore maritime traffic and defend its Arab partners, and demonstrate its power to impose its will. 

For Iran, the regime retains several advantages: geography, time and asymmetry. Iran can target more countries and areas from more positions. The longer the war goes on, the greater the cost to everyone else – and the Iranian regime has superior pain tolerance.

If Iran is left with control over who can pass through the Strait of Hormuz, it could be construed that the US will be judged to have won the fight but lost the war. Victory is thus measured by whether the US can ensure safe passage through the Strait of Hormuz and get the price of oil down.

If President Trump demonstrates his and the US’s power to do what he said he would do, which is win this war by having free passage through the Strait of Hormuz and eliminating Iran as a threat to its neighbours and the world, it will greatly bolster confidence in his and the US’s power.

If, on the other hand, the Strait of Hormuz is left in the hands of the Iranians to use as a weapon to threaten and blackmail American allies in the Gulf and the world economy more broadly, everyone will be hostage to the Iranians, and Trump will be perceived to have picked a fight and lost.

The outcome is existential for the Iranian leaders. To the Iranians, this war is about religious and ideological commitment to what matters more than life. They are willing to die, while Americans are worrying about high gas prices and America’s leaders are worrying about midterm elections in November.

The Iranians’ plan is to try to drag the war out and intensify it because the American public, and therefore American leaders, have limited capacities for pain and wars that drag on. So, if this war is made painful enough and long enough, the Americans will abandon the fight and their Gulf allies, and other allies around the world will see that the US was ineffective in protecting them. That is what Iranian victory looks like; and that is why Iranian regime change or “alteration” is so important to the US.

What about the markets?

There doesn’t seem to be any signs of de-escalation. Meanwhile, the world is starting to see daily struggles. Prices of everyday food staples are going up across Asia. The impact of higher fertilizer costs hasn’t even hit the market. Australia is a big buyer of fertilizer from China, so we will see further rises in food costs. Transport costs have already risen. Central banks, including the RBA, are extremely concerned with rising inflationary pressures.

An early indicator of sentiment in Europe is shown below:

Source: MacroVisor

In the March 2026 Bank of America Global Fund Manager Survey, a broad measure of fund manager sentiment based on cash levels, equity allocation, and global growth expectations, dropped sharply from 8.2 to 5.6, a 6-month low, but still well above the April 2025 “Liberation Day” low of 1.8.

Source: Bank of America