It would be a blow to Confederate morale, and if Richmond is taken it deals a significant blow to the war making capabilities.
However, I see the war continuing into 1862, but probably not 1863.
With a Union victory, it's likely a lot of Union enlistees will sign on for another go and temporarily evade the problem that the term of enlistment is too short.
Since North Carolina was the most reluctant to leave the Union, and there is a strong pro-Union presence in the western part of the state, I see Lincoln pushing for an immediate move into North Carolina to gain that manpower for the Union. 1861 may end with two states brought under much of Federal control.
A lot of the Upper South will be looking at moving back into the Union and distancing themselves from the rebellion. If the Confederates suffer another major defeat - like Grant at Ft Donelson - then a lot of Southerners from the Upper South are likely to defect, or at least not enlist or desert.
The Deep South will hold for a while though, but it is only a matter of time.
I agree with the above. Virginia provided the largest share of soldiers, elite officers and by far had the greatest industrial capacity. It was arguably economically more northern than southern. The remainder of the south barely had any industrial capacity at all.
If Virginia, North Carolina and Tennessee fell early, then the rest of the south would go within a year if they continued to fight at all.
Europe would also be less likely to intervene, even indirectly by buying smuggled cotton and selling powder.
Remember that Bull Run was a bit of a shock to everyone. Alot of people thought the other side would not fight at all.
Politically, the south may try to make a deal.
I would like opinions on what kind of deal that would be?
How far would Lincoln push to permanently end the problem?
How far would the South give?