Good morning! Yesterday prediction markets were in the news as one of the soldiers taking part in Maduro kidnapping was arrested in connection to insider trading on Polymarket. We will watch the case closely, as this is the first American case of prediction markets insider trading.
Outside of that, Thursday went by in a rather escalatory mood with continued airbridge to the Middle East and turmoil inside the Iranian negotiating team. Coming into the weekend, we should expect last diplomacy push while markets are open, followed by either a completion or a kinetic escalation once the markets are closed.
With this ambiguity in mind, let's look at how prediction markets traders are positioned ahead of the weekend.
Iran Tracker
#1 Peace
Chances for permanent peace went down across the board, with no deal being now the most likely scenario, even in the longer term.
This comes even as Trump managed to extend the ceasefire in Lebanon. Traders have now low confidence in the prospects of bridging the gap between the two sides. End of war chances also fell down significantly, indicating that another round of fighting might be necessary to change the situation on the ground, before peace can be achieved:
#2 The Strait Of Hormuz
Strait of Hormuz traffic normalization chances also fell to their lowest level as traders price in another round of hostilities.
Since the first round lasted over a month, expectations are the second one will also take time. Iran is a vast country, and whatever the strategy for round 2, it won't be quick and easy.
Energy prices also increased, indicating alignment between prediction markets and commodity traders:
#3 Boots On The Ground
Despite increased risk of escalation, the invasion market is still trading sideways.
It is a clear indication that traders see another round of strikes, rather than an invasion proper. Based on the rumors, decapitation strikes might be on the menu.
#4 Regional Expansion
At this point, no country is likely to enter the war soon, even in case of renewed hostilities.
The Bab-el-Mandeb Strait closure is also unlikely, but military action between Saudi Arabia and Yemen is on the table as there is some expectation that Houthis might enter the conflict in case of renewed hostilities:
#5 Iran Regime Fall
Chances for Iranian regime fall remain low. In the last few days, public messaging of the regime appears to be more coherent, a clear indication of resilience.
Wrap up
As we wrote yesterday, traders started to price in increased chances of round 2. However, Friday can bring a lot of volatility to the markets as historically, Trump likes to issue dovish messaging right before the markets close, to set them up for weekend escaltions.
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.