Good morning! Overnight, two Saudi vessels were struck by the Houthis as they were trying to cross the Bab-el-Mandeb Strait. Thanks to that attack, traders now see 65% chance of a Saudi military action against Yemen by the end of the month. Didn’t we have enough wars already?
Beyond hostilities, today we examine curious volatility on the Fed hike market, where traders seem to be unsure of the decision for the first time in a long while. Then we move on to tech as we see some signs that a new Claude model might drop today.
Lastly, we show another cautionary tale about rules and disputes.
Let’s take a look at the markets to make sense 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 is back to the slow upward trend, reaching 100.44 points. The index indicates a balanced outlook, suggesting that Republicans have a fair shot at keeping the Senate.
House
HOUSER continues to trend down, dipping below 74 points and indicating that Democrats are a strong favorite to win the House in the midterms.
Main Events Of The Day
#1 The Strait Of Hormuz
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US strikes on Iran have continued for the 12th consecutive day. America focused on targeting southern Iran while the IRGC struck US bases across Kuwait, Bahrain and Jordan. By now, the Strait of Hormuz is once again effectively closed and markets now imply just a 50% chance that traffic returns to normal before year-end:
Comments from US officials, including Marco Rubio, show no signs of de-escalation.
The main oil benchmarks are reacting to the news, with Brent approaching $100 per barrel:
#2 Saudi Arabia Is In Trouble
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Tensions are also rising across the Arabian peninsula. Houthis have reportedly struck two Saudi Arabian vessels—traders increasingly see Saudi Arabia responding, with the chances of a military clash by the end of the month up to 65%.
Iranian pressure on oil transits now has a real chance of jump-starting the dormant Yemen Civil War. If that happens, we will have three active war theaters in the region.
#3 Fed Hike Sooner Than Expected?
Turning to macro markets, the chances of a Fed hike in July suddenly rose to 24%.
However, prediction markets remain more dovish on a hike than bond traders. The FedWatch, a legacy tool of approximating interest rate changes, sees 33% chance of a hike this month.
There is no single catalyst causing the repricing, however we all can see that the Iran war and the inflation it is causing is likely the main factor the Fed officials are observing.
#4 New Claude Opus Today?
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That’s enough politics for one day. Turning to AI, we saw a curious spike in the Claude Opus release market—traders now see a 60% chance we will see a new Opus model today. AI enthusiasts spotted some signs of an imminent release, causing the spike:
If the rumors about its performance are true, we should have a model that is almost as capable as Fable 5 and considerably less expensive. Question—if Opus 5 is extremely close to Fable 5, should we get a new Mythos-class model soon?
#5 World Cup Viewership Dispute
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Lastly, in a sudden reversal, US viewership of the World Cup Final was significantly lower than expected.
While the total audience has in fact breached 58 million, a weird technicality in the rules seems to have pushed a 46-50 million bracket as a correct one. Some of these markets require deep expertise, even if they might look straightforward. It’s another reminder that understanding market resolution criteria can be just as important as forecasting the outcome itself.
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.