WHY DID TRUMP START THE WAR WITH IRAN?

By Henry Cobbe CFA, Head of Research at Elston Consulting

Elston Consulting provides asset allocation insights and fund research to UK-based investment managers and financial advisers as support to their investment committees.
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In this article we explore the geopolitical issues around the conflict.  In a separate article we consider the impact on the economy and the stock market.

Iran conflict with America

What was the US rationale to initiate this conflict?

The US rationale for launching strikes had a number of reasons: some stated explicitly that, other less so. They were:

1. To achieve a regime-change of a long-standing regime hostile to US/Israel interests
2. To stop Iran from developing a nuclear programme that would be an existential threat to Israel and the region
3. To weaken a major energy supplier to China, thereby weakening China in a broader geostrategic and AI rivalry.

The Iran conflict has escalated? Why is this so unexpected?

In January 2026, there was a clear risk of potential US strikes on Iran when aircraft carrier strike groups were dispatched to the Gulf. That’s when we recommended our professional clients to start buying oil for the portfolios and funds they manage.  But a show of force does not necessarily mean military action.  It creates negotiating leverage to show all options are available to the US.
Simultaneous to this show of force were negotiations on Iran’s nuclear programme, the protests and other long-standing contentious issues.  The US broke off these negotiations to attack alongside Israel.
Market expectations were that even if there was a strike it would be limited in scope – as it was in August 2025 – to which Iran responded also in a limited and prewarned way showing relative restraint on both sides.

If this was a risk, why are markets in shock?

Markets are in shock as they have had to digest three unexpected impacts:
Firstly, the extent of the attack on Iran was a surprise.  It was not expected that Israel and US would launch such an extensive attack on Iran’s entire military infrastructure, and deliver a targeted strike to assassinate of Iran’s leader and his family in the (possibly naïve) hope that an uprising would follow and the regime would collapse.

Secondly, it was not expected that there would be a comprehensive and continuous retaliation not just against US bases in the Gulf, but to military and civilian infrastructure of those neighbouring Gulf Cooperation Council (GCC) allies, and also to commercial shipping.  While these risks had been outlined by some US experts, they may not have had a receptive audience.
Thirdly, it was not expected that the reciprocal strikes would escalate to attacks on Iranian and GCC energy infrastructure.  Beyond the closure of the Strait of Hormuz, this is creating, according to the IEA, the largest oil supply shock in history.

What cards does Iran have to play to take on the world’s superpower

Iran has been preparing for an existential conflict with the US since its founding.  There has been a US/Israeli policy of economic containment to pressure Iran’s economy as well as systematic attempt to dismantle not only Iran’s nuclear programme but its network of proxy forces in Iraq, Lebanon, Syria, and Yemen.

Iran does nonetheless till hold some other powerful cards, to use Trump’s parlance.  The three key significant cards Iran holds are:

• Asymmetric warfare: Iran cannot match US/Israeli firepower.  But they don’t need to.  This is so-called “asymmetric” warfare.  You can cause damage with a $40k drone, that is being intercepted by a $2m missile.  You can attack a battleship with drones or an explosives-carrying speedboat or naval drone: you don’t need a fully crewed destroyer.
• Economic disruption: Iran’s de facto control of the Strait of Hormuz through which some 20% of the world’s oil used to pass through each day means Iran can hold the world economy to ransom.  They may let friendly tankers through (valuable exports to China and India).  But not cargoes bound for US and its allies Japan and South Korea. In addition to the Strait, Iran has launched missile and drone attacks on Gulf states’ energy infrastructure – LNG terminals, oil & gas fields.  The risk to GCC states’ business, tourism and transport only compounds the economic damage.
• Domestic oppression: brutal repression of any opposition from the civilian population means there is no domestic cost to pay for this regime.  The lethal brutality with which the January protests were put down shows that the regime is not afraid to suppress internal opposition.

What does this means for US, UK and Europe from a political perspective

The Iran conflict is having both a political and economic impact on the West.

• Impact on the US: part of the MAGA base was attracted to Trump because of his isolationist views, not to get embroiled in expensive, open-ended foreign “forever wars.”  And yet here we are.  This will cause discontent.  But the bigger risk to Trump is the economy and the affordability crisis.  As petrol prices get closer to $4/gallon, Trump can be accused of making life more expensive for ordinary Americans, when his stated objective was the opposite.  Trump has asked Israel not to make further attacks against Iranian energy infrastructure.  But every day that the Strait of Hormuz remains closed, the greater the pressure on oil, gas and petrol.  The mid-term elections are approaching in November and Trump would ideally like to claim a victory before then.  The problem for him is Iran may not let him.  Wars are easier to start than to stop – particularly once they are multi-lateral as this is now.  Whilst the US is vulnerable to a supply shock (the impact on global prices), it is less vulnerable from a security of supply perspective as it has its own energy resources.  This is reflecting in the widening gap between the two major crude oil price benchmarks which reference respective delivery points – West Texas Intermediate (WTI) and Brent Crude.
• Impact on the UK and Europe: The UK and Europe have been reluctant to join the fight and the UK has been reluctant to send any naval assets: perhaps all the threats and baiting by Trump over Greenland increased the levels of distrust between allies.  The UK and Europe are particularly vulnerable to this oil and LNG supply shock.  They are energy importers.  And it could get worse.  Now that Europe has cut its own dependency on cheap Russian gas, Europe needs more expensive US and Qatari LNG.  But as Qatari LNG infrastructure damaged, supply is disrupted, so the price of LNG cargoes could skyrocket further.  Buying more energy with a weakening currency is a bad scenario.  The potential for another 2022-style energy crisis, could reignite inflation and further pressure household finances.

What could happen next?

We see three potential scenarios unfolding, in order of our estimated probability (which will continue to vary with news flow and events):

1. 6 month partial closure (55% probability): The active, kinetic phase of the conflict and retaliatory cycle ends by end April or sooner (and Trump claims victory), BUT Iran will continue to keep the Strait of Hormuz closed to the West, only allowing selective passage for friendly nations through (China, Russia and non-aligned India).  This is “partial” closure.  The end of missile and drone attacks means Gulf neighbours to get back to normality, but Iran maintains the ability to pressure oil prices and hence economic cost on the world.  The partial closure could last up to 6 months (until end August 2026) or as long as related negotiations take place.  This is Iran’s Ace, and the regime is in no hurry to de-escalate or cease the pressure on the global economy.  For comparison, the previous Gulf blockade in 1973 after the Yom Kippur war was for 6 months.
2. 1-3 month partial closure (30% probability): As above, but negotiations or intermediation result in a shorter duration of closure.
3. Ground war (15% probability): There is talk of an expeditionary force of US Marines that could be landed by the amphibious assault ship USS Tripoli at the chokepoint to deny Iran the ability to close the Strait of Hormuz.  They are embarked and will be in theatre by the end of March.  However, it would be too high risk to deploy them, in our view as they would come under intense pressure from drone strikes, and there is no US appetite (for now) for an Iraq-style full invasion, ground war and counter insurgency conflict in Iran.

There’s no “off” button

Unlike Trump’s tariff policy which was reversible once the extent of the risk to the US bond market became visible, there is no “off” button for war.  Furthermore, because Iran’s retaliatory footprint has dragged the entire region, Trump can only control the US policy, and can only influence Israeli or Gulf allies’ policies.  All countries affected will have to act and be seen to act in their own national vital interests.  The region’s return to stability and repair of its infrastructure will therefore take time.

Summary

Iran’s preparedness for this conflict means it is lasting longer and costing more than the US is likely to have expected.  This means it is also having a far bigger impact on the stock market.