06:48 AM EDT, 06/23/2025 (MT Newswires) -- For more than two decades, the Iranian regime has sought to destabilize various parts of the Middle East, said Berenberg.

On its own, a big setback to Iran's apparent attempt to acquire nuclear weapons should count as a positive, noted the bank. In the short run, the United States "one off" strike against three Iranian nuclear facilities over the weekend raises the geopolitical risks in the region to a new level.

Markets will probably shift into "risk off" mode as they await the Iranian response. In the long run, however, a severely weakened Iranian regime could turn into a significant positive for the region, stated Berenberg.

Devastated by decades of mullah rule with an ever-increasing role for the "cleptocratic" Revolutionary Guards, Iran itself has become an almost negligible part of the world economy, pointed out the bank. Its share of global gross domestic product has collapsed from an average of 1.6% in the late 1980s to a mere 0.4% in 2024.

Iran could attempt to cause major damage to the world economy by closing the Strait of Hormuz, the crucial conduit for around 20% of global oil and natural gas shipments. This is the key economic risk to watch, according to Berenberg.

With its long coastline, Iran has probably various ways to disrupt shipping. However, trying to throttle energy exports from the Gulf region would be a high-risk strategy for Tehran. It would likely upset China and many other countries that don't usually side with the U.S.

More importantly, US and Saudi Arabia might jointly suppress such an attempt by force. With its weakened defences, Iran may not be able to withstand such pressure for long. Such a costly conflict may also undermine the internal stability of the Iranian regime even further. The least bad option for Iran might be to try no more than a token retaliation attempt that need not trigger a big U.S. response.

In the past, Iran has sometimes reacted in such a way to setbacks it had suffered abroad. Of course, whether cooler heads may prevail in Tehran is anybody's guess, added the bank.

Iran has "massively" supported Russian President Vladimir Putin's war against Ukraine with weapons and technology. On his trip to Moscow, Iran's Foreign Minister Abbas Araghchi may now ask Moscow to return the favor.

However, Putin has probably little to offer beyond some words. Putin needs his weapons himself for his continued aggression against Ukraine. Perhaps even more importantly, the Russian dictator has cleverly tried to cultivate a relationship with U.S. President Donald Trump.

For now, Trump shows no inclination to endorse the harsh new sanctions against Russia which a bipartisan majority in the U.S. Senate has proposed.

In the short run, the Iran conflict can strengthen the Russian position in Ukraine modestly -- more export earnings for Moscow due to higher oil prices, fewer U.S. defense support for Ukraine as the U.S. has redirected some air defense systems to the Middle East. But if Putin were to annoy Trump over Iran in any significant way, Trump may change tack and impose new heavy sanctions on Russia and/or weaken Putin's position in other ways.

The direct U.S. attack on Iranian nuclear facilities may exacerbate the near-term geopolitical risks of a wider conflict in the Middle East, said Berenberg. Oil prices may stay elevated amid the grave uncertainty about how the conflict will evolve and whether oil and gas exports from the Gulf region could still be impacted to a significant extent.

However, a protracted disruption of such energy flows seems unlikely. The bank continues to base its economic and financial forecasts on the assumption that energy prices will fall back close to their pre-conflict levels by fall, and possibly before that.