Good morning! Despite hopes and expectations of some dovish news, all we got was a ceasefire extension until the Iranians can get back to Trump with a coherent response to the proposed agreement:
This is not what the markets expected and as a result, we got a lot of volatility as traders struggle to understand the endgame.
Iran Tracker
#1 Peace
Short term permanent peace chances collapsed from 40% to 18%, while longer term chances fell below 50%, indicating the deal is less likely than more at this point.
We are currently in an unstable limbo - no war, but no peace either. The end of military operation is also unlikely in the short term:
#2 The Strait Of Hormuz
With no apparent solution to the conflict, chances of the traffic normalization in the Strait of Hormuz fell from 70% to only 55% till the end of May.
We also had escalation in the strait as IRGC attacked several ships trying to cross the strait overnight. Energy also went up on the news, with brent now again flirting with $100 a barrel:
#3 Boots On The Ground
Chances of a US invasion went up slightly to 32% amid continued strong posture of the US forces in the region.
Additionally, the Bush carrier strike group is reportedly days away from the theater, suggesting another round of military action might start soon in case no deal is reached.
#4 Regional Expansion
Regional expansion chances grew slightly on the news, but we are still in unlikely territory, with chances of the UAE joining the conflict at only 10%.
Despite the hardline stance of IRGC, traders also don't believe a Bab-el-Mandeb Strait closure is likely. As long as the fragile ceasefire holds, the Houthi should remain in place:
#5 Iran Regime Fall
Despite an apparent internal conflict, regime fall chances remain low.
The current power struggle is within the regime's institutions. Whoever emerges as the victor, is bound to retain the current regime structure.
Wrap up
Looking at the markets, we are less hopeful than yesterday that a deal can be reached soon. Both sides appear to be at a stalemate that only another round of fighting can break. The fragile ceasefire can hold for a few days, but any prolonged period without progress will be met with a military solution.
We will continue to monitor the situation as the next hours and days will be crucial.
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.