Regime shock in Tehran: What next?

This essay reflects the insights of Carlos Pascual, head of geopolitics and international affairs at S&P Global Energy Horizons.

The confirmed killing of Iran's Supreme Leader, Ayatollah Ali Khamenei, alongside the head of the IRGC and other senior commanders, marks a massive geopolitical rupture. This was not simply a decapitation strike; it was the removal of the Islamic Republic's central nervous system.

Iran's system was built to balance clerical authority, military power, and factional politics under a single arbiter. Iran's arbiter for 37 years is gone. A new Supreme Leader, appointed March 8, will determine whether Iran consolidates, fractures, or lashes out in ways that redraw the strategic map from the Gulf to global markets.

On Feb. 28, the US and Israel launched a coordinated wave of strikes that targeted senior leadership compounds, IRGC command nodes, and nuclear-linked facilities, while signaling readiness to expand to economic infrastructure if retaliation escalates. The scale and precision of these attacks--combined with deep intelligence penetration--suggest a campaign designed not only to degrade capabilities but to paralyze and disrupt the highest levels of the Iranian state.

Still, the potential for regime collapse may not translate into swift transformation.

In April 2003, Iraqis toppled Saddam Hussein's statue in Baghdad, a potent symbol of the regime's fall. The US and its coalition partners had roughly 150,000 US troops on the ground, supported by tens of thousands more from the Coalition of the Willing. They held total air superiority and decisive battlefield success. Stability nevertheless proved elusive as insurgency, sectarian violence, and an institutional vacuum overwhelmed postwar planning.

Iran presents a more complex tableau: a deeply institutionalized revolutionary state with parallel power structures, a mobilized ideological base, and an economy intertwined with its security apparatus. Removing the apex authority does not dissolve this system; it forces its components to compete for primacy under fire.

Iran's energy infrastructure

The first question is how far the ongoing US and Israeli campaign will go. Initial strikes targeted leadership nodes and nuclear-linked facilities and have expanded to refining and oil terminals. How far will the escalation ladder extend to oil infrastructure, export terminals, and ports that underpin Iran's revenue and leverage? And would the destruction of key nodes like Kharg Island loading facilities, export pipelines or desalination plants provoke expanded Iranian attacks on Gulf oil, gas and water infrastructure?

Iran retains tools for retaliation, but the scale, readiness, and survivability of those capabilities are deeply uncertain. How many missiles remain deployable after successive strikes? How much launch infrastructure has been degraded? To what extent have earlier Israeli operations weakened proxy arsenals and command structures?

Hezbollah remains the most capable partner force, yet Israeli attacks have aimed to blunt its ability to open a sustained northern front. Iraqi militias and the Houthis retain the capacity to harass US positions and maritime traffic, but their operational tempo will depend on Tehran's direction and their own exposure to counterstrikes. Iran's leadership must weigh the need to demonstrate deterrence against yet more devastating attacks on its economy and command structure.

The Strait of Hormuz is not a binary question of open or closed. Threats and drone harassment are triggering war-risk insurance spikes, causing underwriters to withdraw coverage, and prompting shipowners to reroute or suspend voyages.

This "risk closure" has already caused the largest oil supply disruption in history, displacing over 15 million b/d of oil. With no outlet, producers will face shutting-in production, causing start up delays when hostilities cease.

The stakes are magnified by the concentration of spare capacity in the Gulf: Saudi Arabia, the UAE, and Kuwait hold most immediately deployable surplus production. Yet spare barrels are irrelevant if tankers cannot safely load, insure, and transit. The same constraint applies to LNG exports from Qatar, which rely on Hormuz for global delivery.

Iran's governance challenge

Inside Iran, the governance challenge is now as profound as the military one.

An interim leadership council--anchored by Iran's president, chief justice, and a senior cleric--has ceded authority to Mojtaba Khamenei, who succeeds his father Ali Khamenei as Supreme Leader. Early signals point to continuity rather than moderation: the regime is likely to double down on deterrence, retaliation, and internal control. Khamenei must consolidate authority while the country remains under airstrikes and amid confirmed intelligence penetration.

Washington has already signaled that senior leadership remains a legitimate target, reinforcing the regime's instinct to harden its security posture. In this environment, power will inevitably concentrate further in the Islamic Revolutionary Guard Corps (IRGC), whose swift appointment of a new commander restores the chain of command and underscores the Guard's role as the regime's center of gravity.

At the same time, Iran's opposition presents both a moral force and a structural paradox. Over years, women, students, workers, ethnic minorities, and professionals have demonstrated against authoritarian rule. Their grievances are demographically broad and deeply felt. Yet the regime's repression has systematically dismantled the very networks--labor unions, civic associations, independent media--needed for coordinated political consolidation.

The result is a landscape of dissent without an organizational spine and a clear pathway to power. In a moment of national trauma and external attack, such fragmentation makes rapid opposition cohesion unlikely, even as public resentment simmers beneath enforced unity.

Any Iranian leadership contemplating talks with Washington must weigh not only external pressure but internal legitimacy. Washington and Israel will likely demand complete denuclearization and dismantlement of Iran's missile capacity--terms that strike at the core of the regime's deterrent doctrine and national narrative. A move perceived as capitulation risks alienating hardline constituencies and emboldening dissent; refusal to engage risks further military and economic devastation that could inflame public anger.

The regime cannot ignore the opposition's latent power: widespread societal grievances mean that economic collapse or perceived humiliation could trigger unrest that even a securitized state struggles to contain. Diplomacy, if it emerges, will be framed not as concession but as a defense of national survival and dignity.

The convergence of military escalation, intelligence penetration, political consolidation, and maritime risk creates a landscape defined by several inflection points:

• US-Israel military scope and negotiating terms: The scale of continued strikes--and the demands attached to any diplomatic opening--will determine whether a credible negotiation track emerges or whether escalation forecloses diplomacy.
• Succession, regime control, and the opposition: Whether a unified, likely IRGC-dominated leadership consolidates authority; whether opposition pressures are suppressed or catalyze unrest; and whether the outcome is an even tighter authoritarian order.
• Iran's retaliatory capacity and vulnerability: The sustainability of missile and drone salvos and proxy operations alongside intelligence breaches that heighten risks to surviving leaders and constrain decision-making.
• Energy flows and maritime risk: A virtual stop of oil and LNG exports is rapidly escalating prices. The critical issue is no longer whether markets are affected, but whether the global economic shock creates sufficient pressure to negotiate.

The deaths of Iran's top leaders have shattered the illusion of strategic equilibrium. What follows will test not only the resilience of the Islamic Republic but the capacity of global systems--energy markets, shipping networks, and financial stability--to absorb a shock emanating from the narrow waters of the Gulf.