President Donald Trump has reportedly notified the United States Congress of a formal state of war with Iran, according to information from Politico. This notification aligns with heightened military actions following the collapse of a ceasefire in early July 2026, after a series of Iranian attacks on commercial vessels in the Strait of Hormuz. However, the ongoing conflict, known as Operation Epic Fury, originally commenced in February 2026. The war was briefly declared “terminated” in May and June 2026 but resumed as tensions escalated. Despite the latest report, the legal framework requires President Trump to seek continued authorization from Congress rather than declare a new conflict. This development impacts the potential for diplomatic negotiations and a US-Iran deal in 2026, as reflected in current market trends.

Key Takeaways

• The report of a formal war notification by President Trump appears to decrease the likelihood of a US-Iran deal, with markets showing a decline in expectations for the inclusion of Iran Reconstruction Funding in such an agreement.
• Market pricing suggests a significant move, with odds for various sub-markets related to a US-Iran deal dropping by 2 to 5 percentage points over recent hours.
• The ongoing hostilities, particularly after the collapse of a ceasefire, are consistent with scenarios where diplomatic negotiations remain stalled.

What to Watch

Watch for any official confirmation from Congress regarding the formal notification and its implications for the ongoing conflict. Key actors, including Iranian Foreign Minister Javad Zarif and U.S. Chief Negotiator Mike Vance, may play pivotal roles in potential negotiations. Markets will closely observe any developments related to ceasefire talks or further military actions, which could influence the probability of a US-Iran deal in 2026. Additionally, any future statements from mediators in Qatar and Pakistan might provide insights into the prospects for renewed diplomacy.

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