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The Iran War Ending The Market Hasn't Priced In Yet

Portfolio Armor's Photo
by Portfolio Armor
Tuesday, Apr 07, 2026 - 20:19

First Lady Melania Trump, President Trump, and the Easter Bunny.

Has The Market Misread How This War Ends?

In our trade alert yesterday, we argued that this war is still more likely to end in weeks than months, and as such, we led off with a postwar reconstruction trade: a bullish options bet on a company the Gulf countries will need when they want to rebuild their desalination plants that were struck by Iran. 

What happened after we posted that only strengthened our view.

President Trump appeared Monday at a press conference with Defense Secretary Pete Hegseth, CIA Director John Ratcliffe, and Gen. Dan Caine, chairman of the Joint Chiefs of Staff, to discuss the rescue of the second F-15 crewmember from Iran. Later, he turned up at the White House Easter Egg Roll.

Neither Trump nor his officials seemed especially nervous about Trump’s Tuesday 8:00 p.m. Eastern deadline for Iran to reopen the Strait of Hormuz or face major U.S. attacks on Iranian infrastructure. 

Why They May Be So Calm

One explanation is that they still expect a deal. Another is that they expect another deadline extension by Trump.

But there is a third possibility, and if you listened carefully on Monday, it may be the most important one: a decisive American victory over Iran.

That came through most clearly in their discussion of the rescue of the downed F-15 Weapons Systems Officer in Iran. Reuters’ account emphasized the scale and complexity of the mission, and the administration used it to showcase American military precision and CIA deception capabilities. That is not the posture of an administration bracing for a long, grinding stalemate. It is the posture of an administration that thinks the balance of power is overwhelmingly in its favor. 

And that posture was reinforced by Trump's Truth Social post this morning. 

The Decisive-Victory Scenario

That matters because the market still seems to be pricing this mainly as a messy, inflationary oil shock.

But there is another scenario, and it is not the one the market seems centered on.

That scenario is not just “a deal.” It is a decisive military outcome: one in which Tehran either capitulates, the current regime loses its ability to continue the war coherently, or some alternative governing arrangement emerges before the conflict drags into a long war of attrition. As some have suggested, the U.S. and its junior partner Israel may be trying to pave the way for Iran's nationalist army, the Artesh, to take power from the Iran Revolutionary Guards Corps (IRGC).  

If that happens, then this war ends not only in weeks rather than months, but with a much faster removal of the oil war premium than the market is currently assuming. A decisive victory is another way this war could end quickly. And if that is what Trump and his team think they are looking at, their public calm makes a lot more sense.

Betting Against Oil

That is the logic behind one of the trades we are placing today: a bearish options trade on the United States Oil Fund (USO 0.00%↑).

If the war ends soon, Hormuz reopens, and crude normalizes, then oil prices could give back a meaningful chunk of their spike by summer. We're targeting a July expiration in our trade with that in mind. 

Late Night Tuesday Update

We ended up getting a two-week ceasefire after the close on Tuesday, and oil futures dropped like a rock after hours. 

Looks like we had perfect timing in betting against oil Tuesday morning. Hopefully, some of you were able to tail. 

If you'd like a heads up in real time when we place our next trade, you can sign up for our trading Substack/occasional email list below.

 

And if you think the ceasefire's going to collapse, and you want to hedge against the war flaring up again, you can use our website or iPhone app to scan for the optimal hedges for that. 

Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.
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