What are the implications of the UK's opposition to the US blockade on Iran? This recent development has led to a notable decline in the market odds for an imminent lifting of the blockade on Iranian ports announced by the US. Currently, the market reflects a 58.5% probability of this announcement occurring by May 31, a drop from 72% just a day earlier.
The UK has taken a clear stance against the blockade, which is also evident in the market for UK warships navigating through the Strait of Hormuz. This figure stands at a mere 1.1% for naval involvement, indicating that traders see almost no chance of UK military action in the area. Notably, the odds for lifting the blockade have experienced a sharp decline, with a significant five-point drop observed around 3:50 PM yesterday, suggesting some market participants misjudged the momentum.
In the last 24 hours, $95,253 in USDC was traded in the "blockade lifted" market, with approximately $8,975 needed to adjust the price by 5 points. This level of trading activity indicates a moderately liquid market, although UK opposition has added uncertainty regarding what many had previously deemed a likely resolution.
The main takeaway here is that the blockade might persist longer than previously expected, delaying possible normalization in the Strait of Hormuz. Traders who are bearish about a rapid resolution now have solid reasons to maintain their current positions. The YES share for Trump’s announcement at 58.5¢ offers a potential payout of $1 if the situation resolves positively, yielding a return of 1.71 times the initial investment. However, this requires a belief that the US can navigate around the UK's non-cooperation within the next 37 days.
Investors should closely monitor NATO's reaction and any statements from CENTCOM. If UK's objections influence broader NATO hesitancy, it could further dampen the odds for a quick resolution regarding the blockade.