Good morning! Trump can only recycle peace talks for so long before the markets stop reacting to his roller-coaster narrative. Thus we are back to strike threats from both sides as the stalemate over deal terms continues.
But are we really on the brink of round 2 of fighting? Last time we got escalating threats we ended up with the current ceasefire. This war has been accompanied with misleading statements since the very beginning so let's look at ho traders interpret recent rumors.
Iran Tracker
#1 Peace
Peace chances took a big hit, especially the longer dated ones, on the news above.
Traders now see only 35% chance of a permanent peace deal by the end of June. With warlike rhetoric from both sides increasing, chances of the end of the military operation, even without a deal approached coin-flip chances:
#2 The Strait Of Hormuz
War rhetoric didn't convince traders that Strait of Hormuz opening is coming anytime soon as traffic normalization chances decreased sharply to 24%.
This is a clear indication that traders don't see the potential next round of fighting as having decisive impact on either the regime or the Strait situation. Energy prices agree with this assessment, with all oil benchmarks above $100 per barrel:
#3 Boots On The Ground
With all the escalatory talk, chances of the US invasion only briefly touched 38%, to settle at slightly increased 36% vs what we saw earlier in the week.
Based on the Axios reporting in the intro, strikes remain the preferred option in case of return to the kinetic action. However, any resumption of fighting risks further escalation and a subdued reaction of the market suggests traders are not really confident we will see military action soon.
Especially since Trump teased a months-long blockade as his preferred option.
#4 Regional Expansion
Be it an extended blockade or military action, an escalation from the US should be met with increased risk of the Houthis engaging in the fight.
That being said, the chances of the Bab-el-Mandeb Strait closure didn't move. It is likely that traders wait for the results of today's war planning meeting before reacting on the regional expansion markets.
#5 Iran Regime Fall
With everything happening, chances of Iranian regime fall remain low.
Be it war or extended blockade, traders don't have conviction it will break the regime.
Wrap up
The no war, but no peace scenario is here. Additionally we now have a war rhetoric putting further pressure on the regime and giving market s a new narrative to trade.
That being said, pretty soon we will start to see the effects of the double blockade globally and prediction markets offer the better window into the global situation in the coming months.
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.