Iran’s Deputy Foreign Minister Kazem Gharibabadi has stated that Iran will respond to recent U.S. actions, according to state media reports. This declaration follows the U.S.’s retaliatory strikes on Iran and the reimposition of oil sanctions in response to Iranian attacks on commercial vessels in the Strait of Hormuz. The situation has heightened tensions and poses potential risks to the Islamabad Memorandum, which had ended the 2026 Iran conflict. Markets are interpreting these developments as reducing the likelihood of Iran reconstruction funding being included in a U.S.-Iran deal by the end of 2026.

Key Takeaways

• Gharibabadi’s statement suggests increased tensions that appear to decrease the likelihood of a U.S.-Iran deal including reconstruction funding.
• Market activity indicates a significant drop in the probability of a 2026 deal, with probabilities falling sharply across various sub-markets.
• The geopolitical situation following the U.S. actions appears consistent with a scenario where diplomatic agreements become more challenging.

What to Watch

Ongoing negotiations in Switzerland are critical, with any breakthrough potentially altering current market perceptions. Monitoring for further military actions or retaliations by Iran will be essential, as these could further impact the likelihood of diplomatic agreements. Key indicators to watch include any announcements from the U.S. regarding changes in sanctions or military posture, as well as Iran’s response to the current situation.

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