First, Iran could admit defeat, explicitly or implicitly. The relative geopolitical calm would ease pressure on oil prices and allow stocks to continue on their bullish path.

Second, Iran could escalate the conflict by retaliating against sensitive targets, including direct attacks on oil exports. The ensuing economic harm could range from modest to severe, depending on how the conflict spreads.

Third, Iran could go through some version of regime change, through a coup, a domestic uprising or some other unforeseen circumstances. How that plays out is difficult to forecast.

Here are how those scenarios might work out in more detail.

Option 1: Iran Sues for Peace

The U.S. attack was calibrated to allow Iran to essentially admit defeat. The Israeli operation has included a campaign of assassinations and other effects to degrade the Iranian regime. The U.S. mission, however, was accompanied by messaging indicating that Washington intends only to eliminate the threat of an Iranian nuclear weapon. President Donald Trump said in his White House address Saturday evening that the next steps were up to Iran: “There will be either peace or there will be tragedy for Iran.”

This scenario would be much like the end of the Iran-Iraq War in 1998, which saw the previous supreme leader accept a humiliating defeat in the interests of living to fight another day.

Israel would essentially write this version of history. “The strongest military in history has acted decisively to eliminate the most tangible existential threat the Jewish state has faced,” Israeli political analyst Amit Segal writes.

Markets would embrace the vision of a new, more peaceful Middle East. “The price of oil should fall and stock markets around the world should climb higher,” writes Ed Yardeni of Yardeni Research in a client note. Gold would fall.

Option 2: Iran Escalates

The Iranian regime may instead make good on the many threats it has made to inflict pain on the U.S. and Israel in the event of an attack like last night’s. Some prominent analysts believe Iran’s theocratic leaders will feel compelled now to do so.

“I don’t see a scenario in which they would not respond, because that would mean accepting unconditional surrender,” said Vali Nasr, an Iran expert at Johns Hopkins, on CNN Sunday. “No regime, no government, would survive that in Iran in the long term.”

Nasr believes Iran may hit Israel rather than the U.S. directly, but many options are available on a menu of geopolitical risks analysts have cooked up over the years. The most damaging would be attempting to mine the Strait of Hormuz. Some analysts believe Iran might first direct its remaining paramilitary proxies in Iraq to attack pipelines there, potentially taking up to five million barrels of supply a day off global markets. Oil prices could exceed $100 a barrel.

Iran has a stockpile of enriched uranium that could be used to make a crude nuclear weapon. The stockpile’s whereabouts are unknown, said Rafael Grossi, head of the watchdog organization the International Atomic Energy Agency. Iran could use such a weapon to target the U.S. or Israel. The first nuclear use since World War II would trigger a flight to safety, with investors selling risky stocks and looking for safety in Treasuries and other similar safe haven assets such as gold.

Unless Iran signals it is admitting defeat, oil traders are likely to price in conflict fears in Monday’s trading, though it may fade if the conflict doesn’t physically impede the flow of oil from the region to the rest of the world.

Option 3: Iran’s Regime Collapses

Iran’s supreme leader, Ayatollah Ali Khamenei, is 86. He has spent heavily on building a nuclear program that is now in ruins, if not permanently destroyed. The Iranian economy is weak, and discontent is widespread. There are at least two ways that the U.S. and Israeli attacks could see the end of his leadership.

One is that he attempts to escalate but becomes vulnerable to attack in the process. In this version, “He digs in and becomes a Hassan Nasrallah,” writes Huss Banai, associate professor of international studies at Indiana University-Bloomington. Nasrallah was the longtime leader of Lebanese militant group Hezbollah; Israel killed him in September.

President Donald Trump said last week that the U.S. has Khamenei’s location and could kill him.

Or, Banai writes, “There’s a coup and a different version of [Iran] appears.” The Iranian regime as we know it was founded in the 1979 revolution. A coup could see Iran’s military leadership take charge, or that leadership could fall in the face of a popular uprising. But because there is little in the way of organized political opposition in Iran, any new government would be at best weak, or in the worst case more radicalized and willing to pursue its grievances.

How that would play out in the markets could range from benign—in the event of a democratic takeover—to sharply negative, if conflict continues without a clear negotiating partner for the U.S. and other world powers.

It took years for the consequences of the 2003 U.S. invasion of Iraq to become clear. Iran’s interest in a nuclear program was one of them. But now that the fog of war has descended, it will be difficult to make definitive judgments about which scenario is unfolding, if any. Iran’s public statements so far have been limited.

“Iran reserves all options to defend its sovereignty, interest, and people,” Foreign Minister Seyed Abbas Araghchi said on X. Khamenei has yet to make an appearance, leading some analysts to believe his grip may be weakening.

For now, oil and other markets are likely to be highly responsive to any signs of escalation.

Write to Matt Peterson at matt.peterson@dowjones.com