We’re bombing Iran, and Iran is now bombing most of its neighbors. Oil prices are up ~20% since the bombing began last weekend, and stocks are down.
Iranian “Supreme Leader” Khamenei is now dead. Prediction markets sort of saw this coming; I mentioned here a month ago that markets thought it more likely than not that Khamenei would be “out of office” this year.1
Real-money US-regulated exchanges can’t directly cover the war, but others can and do, such as the international Polymarket:
This market shows that regime change is likely, but will take time- a 51% chance by the end of the year, but only a 13% chance by the end of the month.
How would this be achieved? Markets see a 60% chance that there will be US troops in Iran this year, though this market could be triggered by just a few special forces operators, or by troops visiting for humanitarian purposes after domestically-driven regime change. There will likely be a US-Iran ceasefire by the end of May. It’s not clear at all who will be running Iran at the end of the year:
Iran is far from the only country whose future leadership is unclear. Last month I noted that the current leaders of Britain, Hungary, and Cuba would likely be out of office by year end. These are all now looking even more likely than they did a month ago:
So I’ll repeat:
Myself, I find most of these market odds to be high, and I’m tempted to make the “nothing ever happens” trade and bet that everyone stays in office. But even if all these markets are 10pp high, it still implies quite an eventful year ahead. Prepare accordingly.
- US-regulated exchanges can’t offer markets on death. Kalshi’s rules stated that if Khamenei died, the market would refund everyone at current prices rather than paying as if he were “out of office”. When he died many people got mad at Kalshi- some who had bet he’d be “out of office” and were mad that they weren’t paid at 100%, others that Kalshi was offering something too close to a death market- “how else would he lose power” (even though Maduro and Assad provide clear recent examples) ↩︎
Economist Writing Every Day 