Ceasefire

This morning, Iran launched a missile attack on the US military's Al Udeid Air Base in Qatar in retaliation for US airstrikes on Iranian nuclear facilities the previous day. The attack involved short- and medium-range ballistic missiles, with Qatar reporting that its air defenses intercepted most of them, and no casualties were reported. Earlier in the day, President Donald Trump thanked Iran for giving the United States advance notice of the coming missile strike! The notice, he wrote on social media, "made it possible for no lives to be lost, and nobody to be injured."

Stock prices rallied on the news because it greatly reduced the likelihood that Iran would retaliate by blocking the Strait of Hormuz. Polymarket.com showed that the odds of this outcome plunged from 60% on Sunday to 16% today (chart). The odds of a US recession in 2025 edged down to 27% today from 66% on May 1. Instead of a blockade, we had reckoned that Iran would sue for peace. This evening, Trump declared on social media that the "12 day war" between Israel and Iran was set to end in a ceasefire. (There was no immediate word from either country on the ceasefire, and the terms of the announced deal were unclear.)