The US-Israel military campaign against Iran has intensified, complicating Iraq’s diplomatic position as it navigates between its critical relationships with both the United States and Iran. Iraqi Prime Minister Ali al-Zaidi’s recent meetings in Washington spotlight the delicate balance Iraq must maintain amidst escalating tensions. The conflict has seen increased military activity, including US airstrikes on Iran-backed militias in Iraq, which adds pressure on Iraq to reconsider its ties with Iran while trying to foster a strategic economic partnership with the US.

In prediction markets, the likelihood of a US-Iran deal in 2026 appears diminished. The intensified conflict suggests challenges for diplomatic progress, affecting markets related to Iran’s reconstruction funding and uranium enrichment agreements. Odds for these outcomes have seen a decline, reflecting market participants’ interpretation of the heightened hostilities as unfavorable for a potential deal.

The geopolitical developments are also influencing markets on a possible Israel-Iran permanent peace deal by the end of July 2026. The current probability remains extremely low, indicating skepticism among market participants regarding the feasibility of a resolution in the immediate future.

Key Takeaways

• Market activity suggests decreased expectations for a US-Iran deal in 2026, influenced by ongoing military actions.
• Ali al-Zaidi’s Washington visit underscores Iraq’s challenging position in balancing US and Iran relations amid ongoing conflicts.
• The probability of a permanent peace deal between Israel and Iran by July 2026 remains low, consistent with current geopolitical tensions.

What to Watch

The developments in US-Iran and Israel-Iran relations could further influence market expectations. Any announcements from Prime Minister al-Zaidi or US officials regarding Iraq’s stance may provide insights into the evolving diplomatic landscape. Additionally, further military escalations or diplomatic breakthroughs involving Iran could shift market probabilities for both the US-Iran deal and the Israel-Iran peace agreement. Observers should monitor statements from key actors, including President Trump and Iranian officials, for potential impacts on market pricing.

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