Good morning! Monday came with yet another attempt to control the markets, but as expected, this time the reaction was more muted than before. Even armchair observers are now confident we will see some kind of a ground operation to free the Strait of Hormuz. Either directly or through gaining leverage over Iran. Especially since the US and Israel ramped up strikes in the recent days, mainly on industrial and energy infrastructure.
So let's see how the markets are positioned for the coming round 2.
Iran Tracker
#1 The Ceasefire
The ceasefire markets reacted as expected - we moved from 30% chance to 34% chance of a ceasefire by the end of April, significantly below last week's reaction.
Both sides remain far apart when it comes to demands and additional 10 days won't change anything. We know that the US is sending more equipment and troops for round 2 and while we know little about Iranian movements, their messaging indicates they are ready as well.
#2 The Strait Of Hormuz
The Strait of Hormuz remains effectively closed as Iran now dictates who, and at what price, can pass the strait.
The market on 20+ ships passing in a single day moved significantly up, to 71% chances on the news that Iran will let 20 more ships through. However, it is unlikely they will pass in a single day.
This is confirmed by the escort operation market, where the price of Yes didn't follow the price action above:
Market expectations are laser focused on a ground operation now rather than a risky and complex escort operation. And prices of energy follow, with WTI closing above $100 for the first time since 2022 and the price of Urals inching above Brent as Asian countries try to tap in favorable types of barrels amid shortages:
#3 Boots On The Ground
As all signs point towards some kid of a ground operation, chances of US boots on the ground reached almost 80%, before dropping slightly on Monday TACO, only to end up at 75% hours later.
We now know that the US has over 50,000 troops in the theater, ready to deploy. It's now the direction of the operation that is unclear. For now, traders doubt it will be Kharg Island as the price action on the market is sideways for a week now:
#4 Regional Expansion
Another option for an escalation would be for either the UAE or Saudi Arabia to join in the fight.
Considering that these countries are the most hawkish in the region, it would be logical for them to join, especially so for the UAE, which could gain disputed islands in the process.
However, such an action carries risks. The Houthi have already joined the fight and in case of any escalation they can decide to close the Bab-el-Mandeb strait, as they did post October 7th. 28% feels a bit low for us in such a scenario. But the Houthi have other choices - there is an equal chance they will decide to attack Saudi Arabia on the ground:
#5 Iran Regime Fall
Lastly, while almost every geopolitical market on Iran experiences volatility, the regime fall one is flat on any news lately.
It feels a bit repetitive, but it is a testament to the regime's resilience.
Wrap up
That's all for today. We expect to see the beginning of round 2 around Easter. The markets will be closed for longer, thus the Trump administration will have plenty of opportunity to calm them before the open.
Make sure to follow prediction markets live to get fresh information on the conflict. Stay strong and see you tomorrow 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.