Markets in a Minute: Winners and Losers – The Fallout of Assad’s Departure in Syria

Winners and Losers: The Fallout from Assad’s Departure in Syria

The unexpected fall of the Assad regime in Syria marks a dramatic shift in the Middle East’s geopolitical landscape. With implications spanning local populations, regional power dynamics, and even global markets, here’s a quick look at the winners, losers, and uncertainties investors should watch. 

Recent developments are bringing me back to my days as a political and economic analyst covering the developing world. I learned then that geopolitical risks have a tendency to lie dormant for years, then come to the fore seemingly unexpectedly. I recently discussed rising geopolitical risk in various areas of the world in a Bloomberg TV interview (timestamp 47:00 minutes). Assad’s fall opens up a new potential chapter for both Syria and the Middle East.

What Investors Should Watch 

The ripple effects of Assad’s fall are far-reaching, but for investors, the key factors to monitor include: 

• Energy Prices: Oil markets have remained tame despite increased geopolitical uncertainty. An increase in volatility could negatively affect global economic stability. 
• Regional Alliances: Shifts in power dynamics, particularly with Iran, Turkey, and Israel, may influence investment opportunities. 
• Global Markets: While further weakening of Russia and Iran could present new strategic risks and opportunities, most global markets have been relatively stable. 

Uncertain: The Fate of Syrians at Home and Abroad 

For Syrians, including the 14 million or so who have taken refuge in other countries, the road ahead is unclear. With Assad reportedly fleeing to Russia from Syria and the government now under a patchwork of control by Sunni-Islamist rebels, Kurdish forces, and various other groups, the country’s future governance is murky at best. Freddy Khoueiry, RANE’s global security analyst, predicts a contested political process as “competing rebel factions attempt to establish a provisional government.” 

For refugees abroad, hopes for a return are tempered by the lack of stability and infrastructure. As much as host countries might wish for repatriation, it remains to be seen whether Syria will offer a semblance of normalcy. 

Loser: A Major Setback for Iran 

The fall of Assad represents a devastating blow for Iran. Syria had been its closest ally in the region, with Tehran investing billions to maintain Assad’s grip on power. This loss dismantles Iran’s land bridge to Hezbollah in Lebanon, severely weakening the militant group and reducing Iran’s threat to Israel. 

Turmoil in Syria comes when Iran is facing internal turmoil of its own. Crippling US sanctions have contributed to soaring inflation, rising unemployment and crushing poverty. Iranian president Masoud Pezeshkian, who was just elected this past June, is under tremendous pressure to stabilize the local economy.  

Compounding Iran’s troubles, Turkey has stepped up incursions into Northern Syria, signaling its intent to fill the void left by Tehran as a key ally to a new Syrian regime. With most of Iran’s regional proxies decimated, its influence in the Middle East is significantly diminished. 

Loser: Russia Loses a Key Ally

Russia, too, finds itself among the losers. Having poured resources into Syria as a strategic ally, the Assad regime’s collapse undercuts Moscow’s foothold in the region. Already stretched thin by its ongoing war in Ukraine, Russia now faces the potential loss of vital land, air, and naval bases in Syria,

disrupting its influence in the Mediterranean and beyond. This is a notable geopolitical defeat for Moscow. 

Winner: A Win for Israel 

Israel emerges as a significant winner. With Iran, its most formidable regional adversary, weakened and Hezbollah hamstrung, Israel’s strategic position is strengthened. This shift could provide Israel

with an opportunity to recalibrate its security policies in the region. For its part, Israel can likely take some credit for the toppling of the Assad regime, having dealt significant blows to Hezbollah and other Iranian proxies over the past 14 months which crippled Iran’s ability to allocate resources to Assad when he needed them most.  

Winner: Ukraine’s Strategic Edge 

Ukraine is closely monitoring the fallout as Russia may be forced to withdraw its assets from Syria depending on how negotiations with the emerging Syrian regime unfold. This setback for Moscow serves as a strategic and political win for Ukraine, if only a minor one. Without a base in the Middle East, Russia will no longer be able to raise funds or spread its influence sending out mercenaries in various African countries such as Central African Republic (CAR), Libya, Mali, and Sudan. At the same time, those forces are redeployed closer to Ukraine. 

Unchanged: The US Stays the Course 

For the United States, the primary focus remains unchanged—preventing ISIS from regaining strength. With 900 troops in Syria, the current and incoming U.S. Administrations have shown no intention of intervening in the power transition. However, there may be indirect impacts, such as further weakening the regimes in Russia and Iran, alongside potential impacts on oil prices. 

Neutral: Oil Markets React 

Geopolitical instability often rattles oil markets, and this event was initially no exception. WTI Brent crude oil rose briefly over the weekend before settling lower. But Syria is not a major oil producer and its closest allies – Iran and Russia – have also seen their contribution to oil markets curtailed by US sanctions. Interestingly, over the last two years oil prices are essentially flat, despite Russia’s invasion of Ukraine and conflict in the Middle East. 

As the dust settles, this geopolitical earthquake serves as a reminder of the complex interplay between global politics and market forces. Stay tuned for further updates as the situation unfolds. 

Invest wisely and live richly, 

Kara