Trading the Iran conflict

With the Fed on hold and the American exodus trade pulling back, there aren’t a lot of great trades to be had out there. The one trade I believe has a decent chance of working is betting on a normalization of the markets that have dislocated as a result of the conflict in Iran. I’m willing to bet that the US bombing Iran was “peak escalation” in this conflict, and that Iran will not 1) blockade the Strait of Hormuz, and 2) that any further exchanges between Israel and Iran will be benign enough for the market to dismiss. Iran doesn’t have a lot of military capability left, and any attempt to blockade the Strait of Hormuz should be short lived as their attempts would be thwarted by the military powers that have an interest in keeping it open. Blockading the strait would also cut Iran off from financial income that they desperately need to rebuild.

Source: OSINT Intuit via Uncharted Territories

I’m not a Middle East geopolitics expert and I could be wrong. Iran has not been a rational actor throughout this conflict, and if they decide to send their remaining military assets on a suicide mission to block Hormuz or attack US bases, then I’d get stopped out. Nevertheless, the reason I like this trade is because we’re in an environment where the market has a strong propensity to close any geopolitical risk premiums that present themselves. The market will drift back towards normalization with every day that goes by without the worst case scenario happening.

The following section is for paid subscribers and provides some color on the trades I placed over the past 24 hours.