Good morning! Welcome back after the weekend. It was a rather uneventful one, but on the other hand we saw plenty of preparations for a ground operation in Iran. The ceasefire effort is essentially dead as both sides prepare for the round 2 of fighting focused on the Strait of Hormuz.
Today we will focus on the main Iran-related markets and how they moved throughout the weekend. As usual, with proper context and analysis of traders' behavior.
Iran Tracker
#1 The Ceasefire
After the weekend, the ceasefire market for April 30 reached a new low while the end of May ceasefire ventured into a not likely territory with Yes price at 46c.
Over the weekend we heard a lot of news about some kind of a ground operation near Iran. Considering that the escalation of military operations works against any ceasefire effort, we saw an understandable move downwards.
Additionally, we've been saying here repeatedly that Iran will be highly distrustful about any negotiations with America alone. This approach is being validated now.
#2 The Strait Of Hormuz
We've moved to analyzing the end of April market as we are at the end of the month, and at first glance, we should be somewhat optimistic about the opening of the strait.
However, 20 ships is less than 20% of usual daily traffic and majority of that number, if achieved, will go through the Iranian route, affirming its control of the waterway. Thus we believe that if achieved, this development will be hawkish for the war rather than dovish.
Our approach makes even more sense when we position it against chances of a US escort operation by the end of April:
Considering all of the above, it is clear why energy prices are still going up, despite all the efforts to stop it:
#3 Boots On The Ground
US boots on the ground chances hit a new high of 79% by the end of the year on hawkish messages from the US.
By some estimates we now have around 50,000 US troops in the theater, ready to engage at a moments notice. It is still unclear what will be their mission; for now traders expect a Kharg Island invasion, but it's far from a given as it's been trading in the low 30s for a week now:
Additionally, there are little signs a wider ground operation, including some regional militias, will begin as chances for the support of the Kurds remain low:
#4 Regional Expansion
Starting today, we will also track regional expansion of the conflict as there are also chances the US ground operation will involve taking over some UAE/Iran disputed islands.
For now Saudi Arabia is a clear frontrunner in chances of an offensive engagement, however we believe that UAE is undervalued on this market. Their economy and image depend heavily on safety, and now their best chance is Iranian regime fall.
#5 Iran Regime Fall
Speaking of regime fall, Iran seems to hold quite nicely as chances of their fall still hoover around 35% by the end of the year.
There is of course a lot of narrative peddling about how bad it is in Iran, but such an entrenched regime lives on more than hopium. They seem well-prepared for the conflict and there was not a single breakthrough suggesting Iran might fall anytime soon.
Wrap up
We are pretty much at the brink of the ground operation right now. The next phase of the conflict will most likely revolve around the Strait of Hormuz issue and we will track that closely. In the meantime we are also looking at Asia, where more measures are being introduced to soften the blow of the energy shortage.
Make sure to follow prediction markets live to get fresh information on the conflict. Stay strong and see you on Monday for another Morning Brief!
This is not official investment or life advice. Do your own research. This are only my opinions and I encourage anyone to do their own research before putting any money anywhere.