The film opens with Watson (Jude Law) in his study, recounting an adventure with Sherlock Holmes on his typewriter. Watson explains that it is 1891, and Europe is in turmoil. A series of bombings by an anarchist group has most of the European nations up in arms.
Cut to a busy marketplace. Sherlock Holmes (Robert Downey Jr.) is smoking a pipe, disguised as a Chinese opium merchant. He is keeping an eye on Irene Adler (Rachel McAdams), who is making her way through the marketplace. She bumps into a gentleman, quickly exchanging an envelope for a package. Holmes sidles up beside Irene and switches the package for a loaf of bread. He warns her that she is being followed by three sketchy-looking men, and wants to know what she is up to. Irene agrees to meet Holmes for dinner to discuss, and pulls Holmes into a nearby alleyway, ostensibly to escape the men.
They are immediately confronted by a thug at the end of the alley, and the other three thugs surround them. Irene says, “It was four men actually, and they are escorting me, not following me.” She takes her package back from Holmes and tells the men to go easy on his face, as they have a dinner date. The men attack Holmes, but using his powers of observation and prediction, he is able to anticipate their moves and disarm them easily. He continues his pursuit of Irene, who is headed to a nearby art auction.
At the auction, Irene delivers her package to its intended recipient, Dr. Hoffmanstahl. Hoffmanstahl gives her a letter in return, a letter intended for the writer’s sister, but Irene is meant to deliver it to Professor Moriarty. Hoffmanstahl believes that the package Irene has given him contains payment, but as he opens it, Holmes appears from nowhere to slap down his bidding paddle to prevent a hammer from tripping an explosive device. The package is actually a bomb, and Holmes warns Hoffmanstahl not to touch anything as Holmes relieves Irene of the letter. Hoffmanstahl touches the bomb, and a secondary trigger initializes.
Holmes sets a tapestry aflame and yells “Fire!” to clear the auction house. Irene flees with everyone else, so only Dr. Hoffmanstahl remains. Holmes throws the bomb into a stone sarcophagus and shuts the lid. As he is wheeling the sarcophagus into a nearby storeroom, Dr. Hoffmanstahl likewise makes his escape. The bomb explodes, but is successfully contained within the stone box. Holmes runs out onto the street to catch up with the Doctor, only to find him collapsed against the side of the auction house. A small dart is embedded in his leg. Holmes takes the dart and slips it into his pocket.
Meanwhile, Irene Adler heads to a teahouse, where she meets with an unseen man seated at the next table. Irene is obviously frightened as she explains that she delivered the package, but lost the letter. She glances suspiciously at her teapot, and asks the server for a fresh cup. The server brings the tea, and she drinks. Professor Moriarty (Jared Harris) reveals himself, expressing his displeasure in Irene’s performance. He says that she let her feelings for Holmes get in the way of her judgment, and he informs her that he will no longer require her services. Moriarty mocks Irene for setting their meeting at her favorite teahouse. She obviously believed this would keep her safe. Moriarty taps his spoon against his cup, and every single person in the noisy, bustling teahouse suddenly falls silent, gets to their feet, and exits. They have obviously been hired by Moriarty to pose as customers. Irene likewise gets to her feet and tries to run away. Moriarty calmly sips his tea as china smashes and a body falls to the ground.
Cut to Holmes, who is waiting for Irene to meet him for dinner. He glances at her watch she is 10 minutes late. He knows something is wrong, but he tucks his napkin into the neck of his shirt and begins to eat.
Sometime later, Watson arrives at Holmes’ house. He can barely enter the apartment, as it is stuffed with exotic potted plants. Watson calls for Holmes, and he can hear Holmes whispering his name, but he is nowhere to be seen. Holmes shoots Watson in the shoulder with a dart, but Watson still can’t see him. Holmes steps away from the wall he’s wearing an “urban camouflage” bodysuit, painted to match the wall and bookshelf, rendering him nearly invisible.
Watson peers into the next room, which is full of news clippings and photos, all connected by red threads. Watson notices one particular news article on Dr. Hoffmanstahl’s sudden death. Watson is very familiar with Hoffmanstahl, as he is a pioneer in medical science. Watson says the death was ruled natural, a heart attack, but Holmes says someone was “tying up loose ends”. Holmes calls his creation “the spiderweb”, and he asks Watson what all these disparate events - Hoffmanstahl’s death, bombings, and the sale of munitions stocks - have in common. Watson follows the threads and sees that they converge at one particular man: Professor James Moriarty. Watson is incredulous, as Moriarty is a respected professor, author, and lecturer, one of the foremost mathematical minds of the era.
Watson reminds Holmes that he is getting married tomorrow, and they are supposed to be heading to his stag party. Holmes responds by shooting a poison dart into Watson’s bulldog. Watson is distraught, until Holmes gives the dog a shot of sheep gland extract to revive him. The dog leaps up and runs out of the room. Watson says might need some of that later, and Holmes offers a small case with a sheep extract shot as a wedding gift.
Holmes says he is under surveillance, so he insists on wearing a large gray beard and travelling by motorcar. Watson says the car is hardly subtle, and Holmes replies, “It’s so overt it’s covert”. They drive to a nearby club where they are met by Holmes’ brother Mycroft (Stephen Fry). The brothers try to outdo one another with stunning feats of observation. They enter the club, where Watson is perturbed to discover that none of his other friends have been invited. He accuses Holmes of forgetting his stag party entirely, and Holmes responds with a very unconvincing toast, during which he is clearly looking around for someone. Watson stalks off to play cards, and Holmes heads upstairs to have his fortune told.
The fortuneteller is named Simza (Noomi Rapace), and Holmes hijacks her cards and proceeds to tell her fortune. He tells her that he is looking for the devil, then gives her the letter stolen from Irene Adler, which was originally intended for Simza. It is from her brother, and it says that he must bid her farewell, because he is about to do something incredible and terrible. Holmes says he needs to find Simza’s brother, but Simza won’t help him.
Simza tries to kick Holmes out of the room, but as he is about to leave, he whispers in her ear that a spare fiber and a distinct aroma have informed him that a Cossack assassin is hiding directly above her in the ceiling. The assassin leaps down, and Holmes pictures how he must evade the assassin’s attack. Before he can begin his evasion, Simza throws a knife into the assassin, but the Cossack barely slows down. A crazy fight ensues, which culminates in Holmes kicking the assassin out the nearest window into the water below. Meanwhile, Simza disappears, leaving only her carpetbag behind.
Downstairs, Watson has gotten into a drunken brawl, and collapses drunken and bruised in Holmes’ arms. Holmes packs him into the motorcar, and Watson awakes extremely grubby and groggy outside the church where he is about to be married. His bride Mary meets him at the altar and is a little shocked at his appearance. Holmes exits the church only to find Moriarty’s right-hand man, Colonel Moran, waiting at the motorcar. Moran says “He wants to meet with you.” Holmes replies, “I was expecting the invitation sooner.”
Holmes heads to the university where Moriarty lectures. Moriarty has just finished a class, and is listening to an opera song by Shumann that Holmes recognizes. The piece concerns a fisherman who muddies water to catch his prey. Holmes notices that although Moriarty owns a book called “The Art of Domestic Horticulture”, the houseplant on his windowsill is withered and dead.
Holmes presents Moriarty with a copy of Moriarty’s own book “Dynamics of an Asteroid” and requests Moriarty’s signature. Moriarty complies. He says that Holmes has complicated his activities, but he has not retaliated out of respect for Holmes’ talent. He comments on Watson’s recent nuptials, and Holmes says that because Watson is now married, he is no longer part of the investigation and thus should not be drawn into their game. Then he asks if Moriarty is familiar with graphology, and analyzes Moriarty’s signature, declaring that his writing denotes a genius, creative, morally abhorrent and ultimately insane mind. Moriarty is angry and replies that Watson will not be spared. In fact, Moriarty intends to send him a wedding present shortly. As a parting blow, Moriarty gives Holmes Irene Adler’s bloody handkerchief and tells Holmes that Irene succumbed to a “rare form of tuberculosis”.
Cut to Watson and his wife Mary, preparing to board the train for Brighton. As Watson boards the train, he notices a ticket taker arguing with a woman, telling her that she can’t use the bathroom while the train is still in station. Watson joins Mary in their private compartment to enjoy a glass of champagne, and the train departs. Before they have gone far, a porter knocks on the door with a bottle of complimentary wine. As the porter sets down the wine, he attacks Watson with a knife. Watson fights him, and Mary grabs Watson’s gun. She points it at the would-be assassin, and Watson opens the side door and throws the man off the train.
Watson hears someone else in hallway, and pulls open the door to their compartment with his gun drawn, only to find Holmes in female drag. Holmes pushes Watson back inside while additional guards shoot from the hallway. As Watson defends the door, Holmes grabs Mary and throws her out the side door off the train. Mary falls off the bridge and lands in the river below. Watson turns around, realizes his wife is gone, and leaps on Holmes yelling, “You killed my wife!”
Holmes assures Watson that Mary is safe, and this is all part of his plan. Right at that moment, three guards burst into the compartment with guns drawn. Watson looks down the barrel of the gun and sees it is jammed with something that looks like lipstick. A flashback shows that Holmes, disguised as a woman, has mixed false capsules in with the guard’s ammo. When the guard tries to fire, a phosphorous bomb blows up in his face, knocking all three guards back into the hallway.
Holmes and Watson take the opportunity to climb out the side door and scoot down the train to an adjacent compartment. Once inside, Holmes tells Watson to lie down on the floor and wait. As soon as Watson lies down, the guards fire a Gatling gun through the passenger cars, splintering the walls and seats. They continue to fire until their ammo jams from another false bullet that Holmes has substituted. Holmes tells Watson to “make it count”, and Watson jumps up to shoot through the hole made by the Gatling gun. The bullet hits the shooter’s shoulder, but a second man takes his place and resumes firing. They are trapped until a second phosphorus bomb makes it up to the Gatling gun, blowing the last five cars clear off the train.
Cut to Mary, swimming down the river. Mycroft rows up in a tiny boat and Mary is furious, but accepts his help.
Back to Holmes, who is asking Watson to join him for one last case. He promises that once Moriarty is deposed, he will never ask for help again. Watson reluctantly agrees, and asks where they are headed. Holmes says “The best place for a honeymoon Paris.”
On the boat ride to France, Watson sees that Holmes is holding Irene Adler’s handkerchief. He holds it to his face for a moment and inhales, then lets it fall into the water.
In France, Holmes and Watson travel to a gypsy camp, where they are immediately stripped of most of their belongings. Holmes has the fortuneteller’s carpetbag, and holds it ransom until they bring him to Simza. Holmes explains that he is still looking for Simza’s brother. Simza says she hasn’t heard from him in a very long time, but he has sent her some pictures. Holmes analyzes the drawings, and determines that the paper comes from a printing press located next to wine cellar. Simza says there is a printing press and wine cellar at the headquarters of the anarchist group with which she and her brother were formerly associated. Simza joins Watson and Holmes as they head to the anarchist headquarters.
The anarchist group is lead by a man named Claude. As Holmes, Simza, and Watson walk through the compound to meet Claude, Holmes notices a cake being wheeled by on a metal cart. Holmes, Watson, and Simza sit down with Claude and try to pump him for information on Simza’s brother. Claude says that he has not seen her brother for a long time. He would like to help them, but he can’t - some time ago, his group received a donation from an anonymous benefactor. Before they knew what had happened, they were completely under the control of the man who now dictates every action of the group, every bombing. Claude says he made a deal with the devil, and he has no choice because this “benefactor” has taken Claude’s wife and children hostage. Holmes says that he can help Claude, he can get his family back, but Claude says he already knows what to do. He says, “You have less than ten minutes”, then pulls out a gun and shoots himself in the head.
Claude’s troops hear the shot and assume their leader has been assassinated. They rush downstairs to avenge him, but Holmes has noticed a few specks of mortar and blood that indicate a hidden passageway. Holmes, Watson, and Simza flee down the passageway, but not before Holmes observes a few sticks of leftover dynamite and an engraving of a Latin phrase he from the opera Don Giovanni.
Holmes, Watson, and Simza race to the opera house, where Holmes quickly locates the Latin engraving on a prop platform. He cuts open the bottom of the platform, expecting to find a bomb, but instead he is confronted with a chess piece. He looks up to the balcony and sees Moriarty watching him through his binoculars. Holmes rethinks his logic, recalling the cake they saw being carted out of the anarchist headquarters. The cart bore the name of a nearby hotel. They rush to the hotel, only to witness an explosion that kills a roomful of businessmen and dignitaries.
Holmes examines the bodies of the murdered men, and notices that one of the businessmen has a bullet hole in his head. He follows the path of the bullet through the window, up to the roof of an adjacent building. Watson sees that a sniper was recently located on the rooftop, and says he must be one of best marksmen in the nation to shoot from such a distance. He also recognizes the sniper’s leftover tobacco as the type smoked on the British Afghanistan campaigns. Thus, the evidence points to Moriarty’s right-hand man Colonel Moran.
At breakfast the next morning, Holmes declares that the businessman with the bullet in his head was clearly the real target - the bombing was simply to cover up his murder. This businessman was the owner of a huge munitions factory located in Germany. Not-so-coincidentally, Moriarty owns a majority share in this company, making him the de-facto owner now that this man is dead. Holmes says he has been following Moriarty, and knows that he is taking the train to Germany that afternoon. They will have some trouble following him, as many of the European borders are closed due to the bombings. Simza says she can smuggle them across, and they meet a few of her gypsy friends in order to sneak across on horseback. Holmes is not a fan of horses, so he rides a pony instead.
They travel to the German munitions factory, and Simza waits outside the grounds while Holmes instructs Watson to send a telegraph. Holmes sneaks inside and sees the factory has manufactured a massive amount of artillery. On the wall are maps detailing every major European country, with the amount of weapons they can be expected to purchase. While he is snooping, Holmes is apprehended by Colonel Moran, who takes him to see Moriarty.
Watson returns from sending the telegraph to find Holmes gone, but Holmes has left Watson a drawing of the nearby lighthouse. While Watson sneaks over to the lighthouse, Moriarty interrogates Holmes, demanding to know who the telegraph was sent to. He sticks a giant meat hook through Holmes’ shoulder and hangs him from the ceiling, singing along to the Schumann song about the fisherman and the fish. He tugs on Holmes until Holmes screams. Meanwhile, Colonel Moran opens fire on Watson. Watson is pinned down, unable to reach the lighthouse. Instead, he crawls to the nearest pile of artillery.
Holmes is in horrible pain. Moriarty throws him on the ground and gets right in his face. Holmes whispers that the telegraph was sent to his brother Mycroft. At the same time, Watson has found a huge cannon and shoots at Moran, causing the entire lighthouse to fall on the building where Holmes is being held. Watson helps Holmes out of the rubble, and they race to rejoin Simza and her gypsy friends. Colonel Moran has likewise rescued Moriarty, and he organizes the soldiers to launch a full-out assault on the fleeing intruders.
The soldiers are firing, there are explosions everywhere, and Holmes and the others can’t go back for the horses, so they race to jump on the approaching train. Two of the soldiers are twins, and one gets shot in the chest. Moran is in hot pursuit, and Watson manages to shoot him in the leg, but Moran keeps firing and kills most of the gypsies. Only one gypsy, Simza, Holmes, and Watson make it on the train. Holmes is badly injured from the hook, and as Watson attempts to stitch up the wound, Holmes goes into shock and stops breathing. Watson tries to revive him, but with no success. Then Watson remembers the sheep extract that Holmes presented to him prior to the stag party. He pulls out the syringe and stabs Holmes in the chest, bringing him around at last. With Holmes revived, Watson asks if they can go home. Holmes says yes, but with a quick detour to Switzerland.
Mycroft joins them in Switzerland. A huge peacekeeping summit is about to convene at a castle located on the edge of a cliff, high above a giant waterfall. Mycroft has a small golden inhaler, his own “private oxygen supply”, to deal with the altitude, and Holmes keeps snitching breaths off of the inhaler. Mycroft says he received Holmes’ telegram, but none of the European governments have responded to Holmes’ information because Holmes has no real evidence against Moriarty. The summit will proceed as scheduled.
The following evening, Holmes, Watson, and Simza sneak into the grand ballroom where the summit is taking place. Each major European nation has sent a delegate to represent them. Holmes notices that one of the delegates has a scar on the side of his face, and is reminded of the twins at the munitions factory who also bore scars on their faces. Holmes realizes that the twins weren’t really twins at all indeed, when the one was killed in battle, the other showed no concern or distress whatsoever. He realizes that the supposed twins must be the work of Dr. Hoffmanstahl, who had been pioneering an early form of plastic surgery before he was killed. Hoffmanstahl could make one man look like another if the twins were an experiment, Hoffmanstahl must have had a bigger job ahead of him. Who could that job be? Holmes deduces it must be an assassin. An assassination is always inflammatory, but it wouldn’t be sure to cause a world war unless the assassin was a prominent member of another country. Therefore, the assassin must be disguised as an ambassador. Holmes is pretty sure that the assassin is really Simza’s brother, but he doesn’t know which ambassador he is disguised as.
Holmes tells Simza that one of the ambassadors is really her brother, but she doesn’t recognize any of them. Holmes thinks the assassination will take place when everyone gathers for the group photograph, which gives them only 10 minutes to find the imposter. Holmes tells Watson that he is master of Holmes’ methods, so Watson and Simza must find the assassin while Holmes faces Moriarty. Holmes sends a note to Moriarty, inviting him to a game of chess out on the balcony. While they play, Moriarty tells Holmes that he knows his “bishops”, aka Watson and Simza, are searching for the assassin.
Watson and Simza examine the delegates, trying to spot Simza’s brother. Watson determines that the man would have scars from the surgery, but four of the ambassadors have hairlines that could cover such scars. Simza has told him that her brother has blue eyes, but none of the ambassadors have blue eyes. This means the assassin must be wearing colored lenses, which would irritate his eyes, but two of the remaining ambassadors are blinking. Watson and Simza are stumped, until Watson realizes that while the assassin was probably trained to remain cool and calm, he might not be prepared for unexpected events. Watson deliberately knocks over a tray of drinks, causing every delegate to look around except for one, a man determined to maintain his composure.
Simza tries to speak with her brother, to convince him to abandon the assassination, but he says, “I’m sorry,” and reaches for his gun. Watson tackles him. As the police drag the assassin away, Colonel Moran shoots a poison dart from his cane, killing Simza’s brother immediately.
Back on the balcony, Holmes and Moriarty hear the commotion and know that Moriarty’s assassination plot has been foiled. Moriarty smiles and says it doesn’t matter, human nature is so base that a world war is inevitable. Moriarty has purchased huge chunks of all relevant industries, from bandages to munitions, and when war breaks out, he will be rich beyond imagining. Moriarty abandons the chess game and is about to leave, but Holmes keeps playing, speaking the moves aloud.
They play verbally until Holmes has Moriarty in check, and then Holmes drops the bomb: he tells Moriarty that he knows about the notebook, a tiny red book that Moriarty keeps in his jacket at all times. The notebook is a record of all Moriarty’s finances, but Holmes knew it would be in code. The code was contained within Moriarty’s copy of “The Art of Domestic Horticulture.” After stealing that book, Holmes allowed himself to be captured at the munitions factory so he could get close to Moriarty when Moriarty threw him to the ground, Holmes snitched the red notebook from his pocket and replaced it with a dummy copy. He sent both books to Mary, who collaborated with Scotland Yard to drain Moriarty’s accounts of every penny.
Moriarty grabs the red notebook from his pocket and opens it. Inside is a flip-cartoon showing a fisherman hooking a fish. The fish turns into a shark and eats the fisherman, then celebrates by smoking a pipe as Holmes is wont to do. “Oh,” Holmes says, “By the way, checkmate.”
Moriarty is livid and is about to physically attack. As he always does before combat, Holmes mentally runs through the altercation. However, Moriarty is clever enough to perform the same mental calisthenics, and together they imagine the fistfight step by step. Due to Holmes’ injury from the hook, they both realize that fight will inevitably end with Moriarty victorious and Holmes thrown over the railing of the balcony, down to the waterfall below. Before Moriarty can move, Holmes grabs him around the neck, throwing them both off the balcony. Watson arrives just in time to watch them fall.
Cut to Holmes’ funeral, and then to Watson finishing the manuscript he began at the beginning of the film. It is an account of his last adventure with Holmes, “the bravest and greatest man” he ever knew. As Watson types “The End”, Mary enters the study and tells him she is looking forward to their upcoming trip to Brighton. Watson says that Holmes would have wanted them to go. Mary says, “He would have wanted to come.” Then she gives Watson a package that was just delivered. Watson opens the package and sees the small golden oxygen inhaler Holmes examined prior to the peacekeeping summit.
Watson runs out of his study to ask his wife who delivered the package. As soon as he is gone, his armchair begins to move. Holmes stands up, dressed in his latest urban camouflage suit. Holmes reads the ending of the manuscript eulogizing himself. When he gets to “The End”, he types a question mark.
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