WE Think: Does the U.S.–Israel Removal of Khamenei Mark the Beginning or the End of the Crisis, and What Does It Mean for Capital Markets?

On February 28, 2026, the United States and Israel launched a joint military operation, “Epic Wrath,” against Iran. Iran responded with the full‑scale counteroffensive “True Promise‑4,” declaring unrestricted military action, closing the Strait of Hormuz, and conducting missile and drone strikes against Israel and U.S. military facilities across the Middle East. On March 1, both Western and Iranian media confirmed that Iran’s Supreme Leader Ali Khamenei and several senior military and political officials were killed in the attack. Subsequent disclosures suggest that earlier U.S.–Iran negotiations in Geneva may have served as a strategic diversion, facilitating the leadership‑targeted strike.

In this edition of WE Think, we assess potential political outcomes in Iran following Khamenei’s death, evolving relations between Iran, Israel, and the United States, and the resulting implications for energy markets, precious metals, and the broader macroeconomic outlook.

Why was a U.S.–Iran confrontation unavoidable?

Israel and Iran engaged in a 12-day missile exchange in 2025, during which U.S. forces also struck Iranian nuclear facilities. However, Iran’s nuclear infrastructure is deeply buried, limiting the effectiveness of air strikes, while a ground invasion would entail prohibitive military and political costs for both the U.S. and Israel. Against this backdrop, targeting senior leadership and pursuing regime change emerged as the most direct option to address Iran’s nuclear ambitions.

Who will control Iran after Khamenei: hardliners or moderates?
Has hostility between the Islamic world and Israel eased or intensified?

In the near term, political control remains firmly with hardline factions. External military pressure tends to reinforce domestic consolidation, reducing the likelihood of a rapid transition toward moderate leadership. Over the medium to long term, outcomes will depend on the authority and governance capacity of Khamenei’s successor, with continued external pressure and prolonged strategic confrontation remaining plausible.

Khamenei was not only Iran’s supreme leader but also a key religious authority for Shiite communities across Iraq, Lebanon, Syria, and the broader region. His removal has further intensified tensions between the Islamic world and Israel and underscores a broader shift toward power-driven dynamics in the global order.

The millennia-old conflict between Islam and Judaism gained new meaning in 2026. By decapitating both a sovereign leader and a religious figure, the Trump administration set a dangerous precedent. Following Maduro's capture in January, this February strike on Iran shows a major power now treats international law as irrelevant—the law of the jungle now rules.

We believe that the removal of Khamenei marks not the resolution of geopolitical risk, but the beginning of a period of heightened uncertainty.

What does a U.S.–Iran conflict mean for the economy and capital markets?

A short-term oil price surge is inevitable, with gold and silver gaining additional support.

Iran plays a critical role in global energy markets. It is OPEC’s third‑largest oil producer, with daily output of approximately 3.2–3.5 million barrels, representing 3%–4.5% of global supply. More importantly, Iran controls the Strait of Hormuz, through which over one‑quarter of global crude oil shipments pass. Any disruption to the strait would likely trigger a sharp short‑term rise in oil prices, intensifying inflationary pressures and generating spillover effects across global growth, monetary policy, and asset valuations.

Gold and silver have performed strongly amid global monetary expansion and ongoing de‑globalization trends, resuming a steady upward trajectory after a February consolidation. Escalating geopolitical risk is expected to further support safe‑haven demand. We remain constructive on the medium‑ to long‑term outlook for precious metals.

Whether oil prices remain structurally elevated remains uncertain and will depend on Iran’s political trajectory and its capacity to sustain a blockade of the Strait of Hormuz. A prolonged closure appears unlikely, as it would place Iran in direct opposition to a broad range of oil‑importing nations. The U.S. and Europe retain the capability to secure maritime transit, suggesting that risk‑driven price spikes could ease as conditions stabilize.

Investment Strategy:

Since early 2026, small caps have outperformed large caps despite market noise. The structural bull trend remains intact. Sector rotations are headline-driven and unpredictable. For institutions, timing them is unrealistic. Patience—staying focused on holdings through the core cycle—is the pragmatic approach.

The structural slow‑bull trend in A‑shares remains intact. Since early 2025, the renminbi has been on a gradual appreciation path against the U.S. dollar, enhancing the relative appeal of Chinese assets, which continue to be under‑allocated by global investors. A disciplined approach—holding high‑quality assets through the core phases of the cycle—remains the most pragmatic strategy.

By contrast, U.S. equities are showing early signs of fatigue. Cryptocurrencies remain in a deep bear market; software stocks face valuation pressure from AI‑driven substitution; financial stocks are impacted by weakening middle‑class consumption; and Nvidia shares declined despite earnings beating expectations. Market behavior increasingly reflects muted responses to positive news and sharp sell‑offs on negative developments. Combined with heavy over‑allocation and the dominance of passive investment flows, downside risks have become more pronounced. We recommend limiting U.S. equity exposure while maintaining an offensive allocation toward high‑quality Chinese assets.

For overseas portfolios, U.S. equity risk exposure should be carefully managed.

Wu Weizhi

1 March 2026

本期《偉志思考》簡體中文版鏈接：

伟志思考：美以清除哈梅内伊是问题的开始还是结束，对资本市场影响几何？