The United States is simultaneously bombing Iranian military infrastructure and negotiating a deal with Tehran.

Secretary of State Marco Rubio indicated on May 22-23 that talks have made “some progress,” with Pakistani officials serving as intermediaries between Washington and Tehran. Meanwhile, US military strikes have targeted key Iranian sites including Fordo, Natanz, and Isfahan, facilities central to Iran’s nuclear and military apparatus.

Bombs and handshakes at the same time

Oil prices have been whipsawing on fears that the conflict could disrupt shipping through the Strait of Hormuz. That narrow waterway between Iran and the Arabian Peninsula handles roughly a fifth of the world’s oil supply on any given day.

The strikes on Fordo and Natanz are particularly significant. Fordo is a uranium enrichment facility built deep inside a mountain, specifically designed to survive aerial bombardment. Natanz has been at the center of Iran’s nuclear program for decades. Isfahan hosts key nuclear research and military production facilities.

Pakistan’s role as mediator adds another layer to the geopolitical puzzle. Islamabad shares a border with Iran and maintains relationships with both Tehran and Washington. Rubio’s acknowledgment of Pakistani facilitation suggests the diplomatic channel is functioning, even if progress remains incremental.

Crypto markets react with surprising calm

Bitcoin has shown notable resilience during this episode, holding key support levels better than it has in previous geopolitical crises.

Prediction markets have become another fascinating barometer of sentiment. Trading volumes on Polymarket related to the US-Iran situation have surged past $430 million. Traders on the platform are essentially placing bets on whether the conflict escalates further or resolves through diplomacy.

What this means for investors

If Rubio’s “some progress” translates into an actual agreement, expect oil prices to pull back sharply as the Strait of Hormuz premium evaporates from crude. Prediction market contracts pricing in escalation would settle at zero, and the $430 million-plus in volume would resolve toward the resolution side.

If talks collapse, further strikes on Iranian infrastructure could provoke retaliatory actions, including attempts to restrict Strait of Hormuz shipping lanes. Oil could spike dramatically, inflation expectations would reset higher, and central banks would face impossible choices between supporting growth and fighting energy-driven price increases.

The Polymarket volumes are worth watching as a leading indicator. Prediction markets tend to aggregate information faster than traditional news cycles. For crypto traders accustomed to 24/7 markets, that information edge is particularly valuable during a crisis that doesn’t respect trading hours.