The intensifying US-Israel military campaign against Iran is putting Iraq in a diplomatic bind, forcing Prime Minister Ali al-Zaidi to balance close ties with both Washington and Tehran. His recent meetings in the US underscore the delicate position Baghdad faces as American airstrikes target Iran-backed militias operating inside Iraq. The pressure comes as Iraq tries to maintain a strategic economic partnership with the US while managing its relationship with neighboring Iran.
Market odds for a US-Iran deal slip
Prediction markets now see a lower probability of a US-Iran agreement being reached in 2026, reflecting the impact of heightened hostilities. The likelihood of outcomes such as reconstruction funding for Iran and uranium enrichment deals has declined, as traders interpret the military actions as a significant obstacle to diplomatic progress. The current odds suggest that market participants expect the conflict to persist, dimming hopes for a near-term breakthrough.
Peace prospects between Israel and Iran remain bleak
Markets also show extremely low expectations for a permanent peace deal between Israel and Iran by the end of July 2026. The probability remains near zero, consistent with the ongoing geopolitical tensions. The lack of diplomatic momentum and continued military activity reinforce skepticism that a resolution is achievable in the foreseeable future.
What to watch next
Observers will be watching for any statements from Prime Minister al-Zaidi or US officials that could clarify Iraq's evolving position. Further military escalation or surprise diplomatic moves involving Iran could shift market probabilities for both the US-Iran deal and the Israel-Iran peace agreement. Key figures to monitor include President Trump and Iranian leaders, whose actions may directly influence market pricing.