Good morning! It's day 14 of the war and finally we are through. People no longer believe the conflict will end imminently and started to discuss wether it is possible to reopen the Strait of Hormuz.
The prospect of a global energy shortage is a stark one for everyone, including the US. While it won't feel the first order effects of the closure it is sure to feel second and third-order effects.
Remember, the global economy is extremely interconnected and complex. In fact, we may not know it, but something might be already broken, and any reopening might already be too late.
Iran Tracker
#1 The Ceasefire
Ceasefire Yes prices continue to drop across all strikes; the effect of not only theta decay, but also the US sending a clear message that they are looking for a prolonged conflict.
Trump believes he has plenty of time to do whatever is necessary in Iran. The goals are still surrender and regime change. But the viability of the war special combat operation hinges on the US ability to reopen the Strait of Hormuz.
#2 The Strait Of Hormuz
Traders actually started to give a little faith to the US ability to reopen the Strait of Hormuz as it is now safely 5c higher than ceasefire price on the same strike.
The US is now saying it's been planning for such an operation for months, but we highly doubt it. The closure being so quick and effective must have surely shocked them as there are still no assets that are ready to escort even the most essential cargo. At the same time we are learning that Iranian missile and drone capabilities might be more extensive than previously thought.
Maybe oil fill finally get the memo as once again all the risk is priced in the upside:
#3 Boots On The Ground
Somewhat shockingly, amid all the new rumors, the prospect of US forces on the ground fell to 55%.
Even amid calls that US troops might be necessary to secure the Strait, some traders don't see it as likely. However, the drop is not significant and we are generally still at the same level since the beginning of the week. And same can be said about the Kurds, who are out of the conversation for now:
#4 Iranian Regime Fall
The prospects of Iranian regime fall stabilized at the pre-war level.
Such a pull-back suggests that traders understand the high-intensity strike campaign, combined with decapitation strikes failed to produce fractures in the regime. This is also the prevailing message we get.
#5 Next Supreme Leader
After a small divergence between the two numbers, the chances of regime survival are now aligned with the chances of Mojtaba Khamenei to remain as the Supreme Leader of Iran.
Our understanding of these 2 markets combined is that traders no longer see the US or Israel doing decapitation strikes. They proved to be largely ineffective when it comes to regime fall.
Wrap up
Situation remains extremely volatile so make sure to follow the markets live to get fresh information on the conflict. 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.