Good morning! It was a difficult weekend to say the least. Not only did we see a massive escalation around the Persian Gulf, but we also saw the sudden passing of a long-serving US Senator. We cover both stories in today’s brief.
Additionally, we expand on our Iran war analysis to include new forecasts on a potential US blockade, as well as developments in Lebanon. Outside of the Middle East, we take a quick look at the Ukraine war as we enter a period of summer fighting.
Lastly, we take a brief look at the US midterms to see if the recent events had any impact on the House and Senate prospects.
Let’s take a look at the markets to make sense out of the news!
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The Midterms Tracker
RED
RED is flat on the day and remains around the 90.5-91.5 range.
Senate
SENR seems to be back to the slow upward trend after a short slump. Index indicates a balanced outlook, suggesting that Republicans have a fair shot at keeping the Senate.
House
After a short period of stabilization around 75 points, HOUSER continues to trend down, indicating that Democrats are a strong favorite to win the House in the midterms.
Main Events Of The Day
#1 The Strait Of Hormuz
The exchange of fire between the US and Iran has continued over the weekend. Iran escalated to targeting American bases in the region, while the US struck multiple targets across Iran, including energy infrastructure.
After Trump declared the ceasefire effectively over during the NATO summit in Ankara, we’ve seen both sides slowly returning to the pre-April 7th status quo. That being said, the energy markets still hope that we can deescalate in the coming days as oil is still below $80 per barrel:
However, ever since Trump’s declaration, the traffic through the Strait of Hormuz ground to a halt:
As a result, traders now see only 17% chance we will see traffic normalization in the strait by the end of August. It seems that oil prices have some catching up to do.
#2 Back to the Old Status Quo?
With all the escalations in the Strait of Hormuz, traders now see an increased risk of a renewed US blockade of Iran.
Trump declared the ceasefire effectively over, but America is yet to reinstate all the measures that were present before the MoU. He might do that soon though, as traders elevated the chances of a blockade by the end of the month from 11% to 31%. At one moment we even reached 53% chance.
As the situation develops quickly, this market is the one to watch. Reinstating the blockade means that we are back to fighting for longer.
#3 Israel x Lebanon to Meet Amid Rising Tensions
We cannot omit the fact that Israel and Lebanon are meeting in Rome amid this escalation. I believe that the Lebanon framework is the main reason Iran went ballistic. Further escalation before the meeting can suggest that its outcome can be extremely unfavorable to Hezbollah.
Iran was looking to protect its proxy through the MoU. However, the clauses in the MoU referred only to the territorial integrity of Lebanon. The framework essentially hires Israel to help the Lebanese government in retaking full control over its territory. While not technically a breach of the MoU, it infuriated Iran.
If you follow developments in the Middle East, the result of this diplomatic meeting could determine the future path of the US x Iran confrontation.
#4 Is There Not Enough Pressure on Oil?
Turning to Eastern Europe, Ukraine continues its deep strike campaign against Russia. As a result, airspace over Moscow was closed. However, Russia says that all of the missiles and drones were intercepted.
What we see on the market is that traders continue to underestimate the intensity of the Ukrainian strike campaign. As the summer offensives are set to ramp up soon, both sides are trying to hurt each other as much as they can. However, it’s Ukraine that apparently sees more success.
In the recent months Ukraine targeted multiple oil refineries and pipelines. It hurt Russia’s main export industry in the times of decreased oil supply globally, significantly suppressing any potential windfall profits. Additionally, Ukraine is getting a license to produce Patriot missiles.
Chances are the Ukraine war is the conflict to watch during summer as a lot can change in the next few months.
#5 It’s Not Mitch McConnell Who Saw His Term Shortened
Lastly, let’s move to domestic issues. As Mitch McConnell appears to be getting better, it’s another Senator who’s sudden illness caused him to prematurely end his term.
Lindsey Graham died over the weekend. Apparently, the cause of death is cardiac arrest. Graham was a known war hawk and he has just returned from Ukraine per his schedule.
May he finally find peace, something he seemed to struggle with during his life.
Wrap up
That’s all for today!
We will continue to monitor the situation on prediction markets.
Make sure to follow prediction markets live to get fresh information on the conflict. Stay strong and see you tomorrow for another Morning Brief!
Brought to you by Stand
Stand is a prediction market aggregator and the advanced trading terminal of choice for professionals. On Stand, traders discover trends, track traders, copy trade, get whale alerts, automate trades, and so much more.
This is not official investment or life advice. Do your own research. These are only my opinions and I encourage anyone to do their own research before putting any money anywhere.