Good morning! We are entering day 5 of the 3-day Special Combat Operation in Iran. The information online is getting more sparse as governments in the region curb down on unauthorized footage to counter misinformation.
Thankfully, we have predictions markets to help us understand key risks around the war. It's especially important now to differentiate between propaganda and truth so let's see how the markets price current risks.
Iran Tracker
#1 The Ceasefire
Starting with a ceasefire, traders started to price in at least a few weeks of fighting.
Trump is doubling down, claiming that Iranian's want to talks, but it it too late. At the same time Iranian comms also claim there is nothing to talk about and they are ready for a prolonged campaign.
However, it is constant developments on the ground that make any immediate off-ramps more and more unlikely.
#2 The Strait Of Hormuz
Prediction markets are also reacting to the de facto closure of the Strait of Hormuz. While the market is currently in dispute, it is indisputable that the traffic through the Strait is close to zero.
At the same time, oil is rising steadily, now projected to reach close to $90 before the end of the month. However, the more impacted brent is already at $84 and rising.
#3 Boots On The Ground
Markets also think it is increasingly likely we will see American boots on the ground eventually, giving it almost 60% chance by the end of the year.
It is clear that you can't achieve proper regime change without boots on the ground.. However, there is an option in the short-term - rumors are that the Kurds are being enrolled to march on Tehran. Traders price in 63% chance we will see an official announcement by the end of the month!
#4 Iranian Regime Fall
With all the chaos, traders remain unsure about the future of the Iranian regime though.
The fall by the end of the year is priced as a coin-flip, indicating uncertainty rather than a fundamental assessment of the situation. Because despite all the strikes on the Iran's capital, the regime still looks resilient to strikes alone.
#5 Next Supreme Leader
Lastly, it seems that there is a front-runner for the Supreme Leader position.
Rumors are that the second eldest son of deceased Ali Khamenei is to get the position. He seems to be confirmed alive after the strike on the assembly, putting him in as the obvious favorite. A good indication of the short-term resilience of the regime.
Wrap up
Situation remains extremely volatile so make sure to follow the markets live to get fresh information on the conflict. 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.