Good morning! We are almost 2 months into the special combat operation in Iran and the prospects of durable peace are further away than expected. We are now in a fragile stalemate, where both sides believe that they can outlast the other and force them into concessions.
At the same time, we have a series of refinery incidents around the world, further limiting available energy supply, along with constant Ukrainian strikes on Russian energy infrastructure.
It seems like we are sleepwalking into the biggest depression of our lifetimes, so let's take a look at prediction markets to see what is the forecast.
Iran Tracker
#1 Peace
The situation is more dire than ever with prospects of permanent peace almost at the lowest level ever.
At 48% chances by the end of June, it is more likely we will see no peace by that time. Despite the talks roller-coaster narrative, traders are more and more doubtful that we will see any real results.
The end of combat operation market exhibits the same trend, although it is more likely we will see the end of it by end of June:
#2 The Strait Of Hormuz
As prospects of peace escape us, so does any normalization of traffic in the Strait of Hormuz.
With only 34% chances of that by the end of May and with a decreasing trend, we are sleepwalking into the biggest energy supply shock of our lifetimes. However, paper energy prices are still reacting as if the conflict can end soon and all the problems disappear with it. While prediction markets price in prolonged closure, traditional markets fail to properly react to the reality on the ground, showing how useful it is to have real event contracts:
#3 Boots On The Ground
Despite low chances for peace, prospects of a US invasion of Iran remain in the low 30s.
Even as the massive airlift into the Middle East continues. It is a clear indication that traders expect the current game of chicken to continue. Trillions are at stake, and so are lives of millions of people and neither side seems ready to concede.
#4 Regional Expansion
With the US military escalation unlikely at this point, prospects of a regional expansion of the conflict (or the stalemate) remain low.
Houthis declare readiness to engage, but traders see any escalation as unlikely now. Seems like only time can change the situation on the ground.
#5 Iran Regime Fall
Even as Trump claims that Iranian oil infrastructure might collapse in 3 days due to the blockade of Iranian ports, the chances of regime fall remain low at 22%.
This is a clear indication that traders don't believe Trump here and expect Iran to have way more spare storage and blockade evasion options, to prevent their oil wells from shutting in.
Wrap up
As we currently see the markets, traders are pricing in a prolonged no war, but no peace scenario. That being said, we expect talks rumors and new deadlines to appear from time to time to manage markets and create a sense of progress. However, until more pain is felt on either side, we think nothing much can change.
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.