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Israel Military & Geopolitical Risk Index

A dynamic look into the nation's evolving risk landscape

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TL;DR:

  • Houthi missile strikes near Tel Aviv escalate tensions; Israel retaliates with airstrikes on Yemen’s Hodeidah port, highlighting regional volatility.
  • Israel Military & Geopolitical Risk Index at 49%, tracking military, diplomatic, and domestic risks via weighted prediction markets.
  • Key markets show 15% chance of military action against Iran by June, 19% for Hamas ceasefire before June, and 24% for Saudi normalization, signaling varied risks.
  • Long-tail market "Social security checks delayed/not sent before July?" at 9% reflects U.S. fiscal concerns, with $8,321 in volume.

Market Snapshots

Event Breakdown

The Israel Military & Geopolitical Risk Index: Recent escalations in the Middle East have intensified as Houthi rebels in Yemen launched missiles targeting Israel’s Ben Gurion Airport prompting a swift Israeli response. Israel has since conducted airstrikes on Yemen's Hodeidah port city, hitting key infrastructure in retaliation, marking a significant escalation in the conflict. This tit-for-tat exchange underscores Israel’s volatile geopolitical landscape and evolving risk environment.

We recently developed “The Israel Military & Geopolitical Risk Index” which offers a dynamic snapshot of the nation's evolving risk landscape, standing at 49% as of the time of this writing. This weighted index synthesizes prediction market data across military actions, ceasefires, withdrawals, diplomacy, territory changes, and domestic politics, providing a comprehensive view of potential escalations. It prioritizes near-term events, severe impacts, and high-liquidity markets, ensuring a balanced reflection of current tensions.

Key markets driving the index include military action probabilities, such as Israel military action against Iran before July?” and "Israel x Turkey military clash in 2025?," alongside ceasefire and withdrawal scenarios like "Israel x Hamas ceasefire before June?" and "Israel withdraws from Gaza in 2025?" Diplomatic tensions are tracked through markets like "Israel and Saudi Arabia normalize relations in 2025?," while territorial ambitions are gauged with "Will Israel annex Gazan territory before July?" Domestic stability hinges on "Netanyahu out in 2025?", reflecting political volatility. These markets, visualized in accompanying charts, show recent shifts, with notable spikes indicating heightened trader concern.

The real-world implications are significant. Military action markets, particularly those involving Iran and Turkey, suggest potential disruptions to regional stability, with trade routes and energy supplies at risk. A 15% probability for action against Iran by June could signal preparations that impact global oil markets, given Iran's strategic role. 

Ceasefire and withdrawal markets, with 19% and 27% odds respectively, hint at ongoing negotiations with Hamas and the feasibility of de-escalation in Gaza, affecting humanitarian conditions and international aid flows.

Diplomatic normalization with Saudi Arabia at 24% could reshape Middle East alliances, influencing U.S. policy and trade dynamics.

Territory annexation probabilities concerning Lebanon and Syria, though low at 3% and 4% respectively, carry long-term geopolitical weight, potentially altering borders and sparking international backlash.

Domestically, a 16% chance of Netanyahu's exit underscores political uncertainty, which could either stabilize or further complicate military decisions.

The value of this weighted index lies in its ability to distill diverse market signals into a single, actionable metric. By emphasizing time horizon, impact severity, and liquidity, it filters noise and highlights true risk levels, offering traders a clearer picture than individual markets alone. For instance, a spike in the index might reflect a convergence of military and diplomatic tensions, a signal missed in isolation. In the future, we envision these indexes as tradable assets, allowing investors to hedge geopolitical risks directly. This approach empowers traders to capture aggregated probabilistic insights, turning raw data into strategic opportunities.

These markets also serve as a window into how news—border skirmishes, diplomatic moves—translates into tradable information. A recent uptick in the index might correlate with reported military movements, prompting traders to adjust positions. The methodology's transparency, prioritizing high-signal events, ensures reliability, making it a tool for both hedgers and analysts. As tensions evolve, tracking these markets will provide real-time updates, underscoring their role in navigating Israel's complex risk environment. This index not only informs but also anticipates, positioning you as the reader at the intersection of news and actionable insights.

Related markets & forecasts:

Long-Tail Radar

This week’s Long-tail Radar spotlights an intriguing market on Polymarket: "Social security checks delayed/not sent before July?" with $8,321 in volume. The market has seen modest fluctuations since its inception, starting around 20% in early April and trending downward to 9% by May 6th, as shown in the accompanying visualization. This downward trajectory reflects cautious trader sentiment, likely influenced by recent developments in U.S. fiscal policy and budgetary debates, which have raised concerns about government funding stability.

The market's relevance stems from ongoing news surrounding U.S. debt ceiling negotiations and federal budget disputes, which have historically threatened government operations. In late April, reports of stalled talks in Congress, coupled with warnings from the Treasury Department about potential cash flow issues, may have contributed to the initial market activity. While the probability has since declined to 9%, the market remains a critical barometer for gauging fiscal risk, especially as the July timeline approaches—a period often associated with heightened budgetary scrutiny. This long-tail market captures a niche but significant concern, offering traders a window into a potential disruption that could ripple across the economy.

If Social Security checks were indeed delayed or not sent before July, the implications would be profound. Over 66 million Americans rely on these payments, with monthly disbursements totaling roughly $120 billion (based on 2023 SSA data). A delay could disrupt household finances for retirees, disabled individuals, and survivors, many of whom depend on these funds for essentials like housing, healthcare, and food. Economically, the impact would cascade—local businesses, particularly in retail and healthcare sectors, could see reduced spending, potentially shaving off billions in economic activity. Politically, such a failure would likely spark significant backlash, pressuring lawmakers and influencing voter sentiment ahead of upcoming elections.

This market exemplifies the power of long-tail prediction markets to highlight under-the-radar risks with outsized impacts. Its $8,321 in volume, while modest, signals growing trader interest in fiscal stability concerns. As news evolves—whether through budget resolutions or renewed debt ceiling tensions—this market will likely see further movement. Track it on Polymarket for real-time updates, as it offers a unique lens into a critical, yet often overlooked, economic risk.

Questions we asked

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