By Samer Hasn, Senior Market Analyst at XS.com
Oil prices are drifting sideways following the aggressive whipsaw moves seen since early February, as the geopolitical risk premium temporarily cools.
However, the market remains dangerously prone to a volatility spike amid contradictory signals emerging from the latest US and Iran negotiations. The coincidence of diplomatic talks with massive military buildups on both sides suggests that traders are pricing in a binary outcome of either a breakthrough or a breakdown.
Iran briefly shut the Strait of Hormuz during drills while the US deployed 50 advanced aircraft, of which assets that rarely move unless absolute necessity dictates. This posturing signals how ugly the scene could get if war flares up, threatening a regional conflict with hard hitting economic impacts on global supply chains.
Igniting a war would likely send crude prices vertically higher in the short term until the market can reassess the risk of disturbing energy supplies.
While the latest Geneva talks concluded with an agreement on guiding principles, the Wall Street Journal notes that negotiations remain deadlocked over core security demands. Vice President JD Vance emphasized that Tehran has yet to acknowledge the administration’s red lines regarding the total decommissioning of nuclear infrastructure.
Consequently, Washington is utilizing a massive military buildup to maintain a surrender or face consequences posture while Iran demands immediate relief from crushing sanctions.
According to Axios, the US is maintaining this high-pressure environment by deploying a second aircraft carrier strike group and over 50 advanced fighter jets to the region. This arrival of F-35s and F-22s signals that Washington is prepared to pivot rapidly from diplomacy to military action if upcoming proposals fail to meet President Trump’s demands. Moving a bulk of F-22 jets is something we should not ignore at all.
Meanwhile, Reuters confirms the stakes are rising, reporting that Iran shut down the Strait of Hormuz for a few hours on Tuesday citing security precautions.
Amid these contradicting signals, prediction markets are potentially opening a window into insider information that we might miss. According to Polymarket data, the bet on the date of a US strike on Iran has attracted the largest volume on the platform at $283 million. The money is specifically targeting February 28 and March 31 with chance of a strike of 20% and 47% respectively, suggesting a high conviction on a near-term escalation timeline.
These betting flows carry significant weight because actual insiders are increasingly participating in these markets. The Wall Street Journal reports that Israel’s internal security agency arrested several reservists for allegedly using classified military information to place informed wagers on Polymarket.
This unprecedented case highlights that betting data can be a crucial market signal, as financial incentives are now compelling individuals with nonpublic access to reveal state secrets.