Iran War: Invasion Risks
· Any ground-based invasion would likely result in a long war and Iran would likely counter with attacks on energy or other key facilities around the Gulf. Sea and air based invasions are also difficult, while any victory would likely be followed by occupation. WTI oil prices would spiral higher to USD120-150 on fears that the Strait of Hormuz could be closed for months (here). This would cause major risk-off in global markets. This financial market risks could mean that the Trump administration stops short of ground invasion and could threaten to blockade Iran oil/bomb power plants, but still trying to reach a ceasefire deal – our baseline remains for a 4-to-8-week war.
While U.S. President Donald Trump claims peace talks are going well, he continues to threaten a ground invasion of Kharg Island. What would be the impact of such an invasion?
Figure 1: Major Middle East and Other Invasions
| Troop Numbers | War Length | Comments | |
| Gulf War 1991 | 689k U.S. | 42 days | 42 country coalition with 6 month build-up and 42 day desert storm. Ground invasion by Saudi Arabia. Iraqi sea mines severely damaged two U.S. Navy vessels, the USS Princeton and USS Tripoli. 2 year mine clearance after the war. |
| Iraq Invasion 2003 | 466k U.S. | 26 days | Six country coalition with 6 month build-up and invasion by land through Kuwait. |
| Iran-Iraq 1980 | 210k Iraqi | 8 years | Iraq invades Iran September 1980, with former Iraq leader Saddam Hussain starting peace negotiations June 1982 but a UN ceasefire only reached August 1988. |
| Ukraine War 2022 | 190k Russian at border | 4 years | Land based invasion from Russia and via Belarus. 5 month build-up at the border. The war is ongoing with Russia holding around 20% of Ukraine’s land. |
| Falklands 1982 | 25.9k UK | 42 days | UK did not have air superiority. UK Lost seven ships—four warships and three auxiliary/merchant vessels—along with one landing craft. |
Source: Continuum Economics
While our baseline remains for a 4-to-8 week war (here), what would happen if the U.S. president decided to put boots on the ground in Iranian territory?
· Military build up for months rather than weeks? The U.S. build-up before the 1991 gulf war and 2003 Iraqi was around 6 months (Figure 1) and the U.S. military would likely strongly advise the Trump administration that build-up cannot be rushed. If the objective is Kharg Island (90% of Iran’s oil exports), then the build-upcould be shortened– though Iran is reported to have reinforced Kharg Island defense in anticipation of a U.S. invasion. The Iran mainland around the Straits of Hormuz would be more difficult, while islands in the Straits of Hormuz would be symbolic but would not free up the Straits of Hormuz and guarantee the reopening of the shipping lanes. This could mean that the current phase of the war has to be continued prior to an invasion happening in April/May.
· Land invasion easier than sea/airborne invasion. Gulf/Iraq wars were by land and were over in 1 ½ months, but utilized much larger forces (Figure 1) than the 50k U.S. troops reported to be currently in the Gulf or on route. Russia invasion of Ukraine rapidly became bogged down, as did Iraq invasion of Iran in 1980. The UK victory in 1982 in the Falkland Island was sea based, but resulted in the loss of four UK warships – though the U.S. has air superiority over Iran unlike the UK in 1982.
· Stuck for years. Of course if the U.S. took Kharg Island, it could have to hold it for years. Negotiations could drag on and the Strait of Hormuz could be closed for months. Financial markets would switch to discount a long war, with oil prices surging to USD120-150 and major risk-off.
· Peace talks and blockade threats? Trump has tried bullying NATO into freeing up the Strait of Hormuz, alongside twice delayed threats to blow up Iran power plants. With the April 6 deadline approaching, Trump could decide to declare victory in the war without a ceasefire deal or fight on for 8-10 weeks in total as Marco Rubio suggested to G7 foreign ministers last Friday but try to reach a deal. He could also come up with new threats and the military will probably suggest a blockade of Kharg Island or stopping Iran oil tankers in the Arabian sea. These would be less risky than a ground invasion, though could still see Iran attack gulf energy assets if the U.S. starts a blockade.
· We feel that the downside risks to the U.S. financial markets and economy will be enough to encourage the U.S. to stop the war without or with a limited ceasefire deal (here).