Core Viewpoint - The ongoing conflict between the US, Israel, and Iran is evolving into a prolonged war, contrary to initial expectations of a quick resolution, leading to increased market volatility and economic scars [2][4]. Group 1: War Dynamics - The initial market reaction to the conflict was a modest decline of 3%-4%, driven by hopes for a swift resolution, but the situation has become more complex [4]. - The interests of the US, Israel, and Iran are misaligned, making a ceasefire unlikely in the short term [5]. - The US aims for a quick victory to avoid inflation impacts and midterm election repercussions, while Israel seeks to leverage US support to eliminate Iranian threats [6]. Group 2: Economic Implications - The conflict could lead to a significant increase in global inflation, with the potential for oil prices to rise dramatically, impacting the US economy [8][11]. - The volume of oil passing through the Strait of Hormuz has plummeted by 97%, with estimated losses reaching 17.6 million barrels per day, exacerbating supply issues [11]. - Historical data suggests that large-scale oil supply shocks typically result in a 42% average decline in production four years later due to infrastructure damage [11]. Group 3: Financial Market Risks - The conflict is amplifying existing financial risks, particularly in the private credit market, which is facing significant redemption pressures [15][16]. - Major asset management firms are experiencing record redemption requests, indicating a potential liquidity crisis reminiscent of the 2008 financial crisis [15][16]. - The interconnectedness of macroeconomic cycles, geopolitical tensions, and financial leverage could lead to severe market volatility and systemic risks [17].