President Donald Trump has officially rescinded Syria’s designation as a state sponsor of terrorism, a status it held since 1979. This decision follows the ouster of Bashar al-Assad’s regime and the establishment of a new transitional government led by Ahmad al-Sharaa. The move is part of a broader effort by the U.S. to normalize relations with Syria and lift sanctions to aid its post-conflict recovery. This development comes after significant policy shifts, including the repeal of the Caesar Act and removal of most economic sanctions last year. Market participants appear to interpret this rescission as potentially influencing broader Middle East diplomacy, including U.S.-Iran relations and the prospects for an Israel-Iran peace deal.

Key Takeaways

• Market activity suggests the rescission may indicate a shift toward diplomatic engagement in the region, possibly affecting the likelihood of a U.S.-Iran deal.
• Participants appear to view the move as decreasing the probability of U.S. military action against eight countries in 2026, reflecting a potential easing of tensions.
• The decision may support scenarios in which a permanent peace deal between Israel and Iran becomes more likely, as it reflects a broader de-escalation strategy.

What to Watch

Observers should monitor U.S.-Iran negotiations for any new developments that might influence the ‘Iran Reconstruction Funding’ inclusion in a 2026 deal, currently priced at 33% YES. Additionally, watch for any diplomatic statements or actions that could impact the probability of a permanent peace agreement between Israel and Iran, where the market is priced at 2% YES for a deal by July 31, 2026. Any significant new military actions or diplomatic breakthroughs could shift these probabilities.

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