Millions of Iranians flooded Tehran's streets for the funeral of Supreme Leader Ayatollah Ali Khamenei, marking the end of a 35-year tenure that shaped the Islamic Republic's confrontational posture toward the West. The procession, broadcast across state media, showed crowds stretching for kilometers through the capital as officials declared five days of national mourning.

The leadership transition now underway carries immediate implications for global energy markets. Iran sits on the world's second-largest natural gas reserves and fourth-largest proven oil reserves, yet sanctions have capped exports at a fraction of capacity. Any shift in nuclear policy or sanctions enforcement under a new supreme leader could redirect 1.5 million barrels per day of potential supply. The Assembly of Experts, an 88-member clerical body, will select Khamenei's successor — a process opaque to outside observers but critical to whether Tehran pursues negotiation or escalation.

Regional allies and adversaries alike are recalibrating. Hezbollah, Hamas, and Houthis — recipients of Iranian funding and arms — face uncertainty over whether the next supreme leader maintains the "Axis of Resistance" strategy. Meanwhile, Saudi Arabia and Israel monitor for signs of doctrinal change that could alter proxy dynamics across Lebanon, Gaza, Yemen, and Syria.

Markets should watch the Assembly of Experts convening timeline and any signals from interim leader Mojtaba Khamenei, the late leader's son, whose influence remains untested. A hardline successor likely extends sanctions deadlock; a pragmatic choice could reopen JCPOA talks. Either path moves oil risk premiums.