The Islamic Resistance in Iraq has announced plans to target US interests and military bases in Iraq and the broader region should Washington intensify its assaults on Iran. The warning, issued amidst the ongoing US-Israel conflict with Iran, represents a potential escalation in hostilities. Since the conflict’s onset in February 2026, Iran-backed militias have launched over 600 attacks on US sites in Iraq. The current military climate includes active US and Israeli airstrikes on Iranian territory, with Iran retaliating against regional targets. This development suggests heightened tensions that could impact diplomatic efforts.

Key Takeaways

• The warning from the Islamic Resistance in Iraq suggests heightened military tensions, which appear inconsistent with scenarios supportive of a US-Iran deal.
• Current market pricing reflects a decrease in the likelihood of a US-Iran deal, as evidenced by a drop in YES odds.
• The ongoing conflict in the region continues to influence market expectations, with the potential for further volatility.

What to Watch

The focus remains on US and Iranian actions over the coming days, particularly any further military escalations from either side. Key figures such as US President Donald Trump and Iranian Foreign Minister Javad Zarif will play critical roles in shaping the diplomatic landscape. Any significant military developments or diplomatic breakthroughs could shift current market pricing, potentially impacting the perceived likelihood of a US-Iran deal in 2026. Market participants will be closely monitoring for any indications of either de-escalation or further conflict.

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