Israel-Iran truce odds rebound, but lasting through November is still a toss-up

Traders again see a ceasefire between Israel and Iran as likely to hold through Nov. 6, after a sharp drop in confidence early Tuesday that was mostly reversed within about an hour. The swing took expectations from near certainty to a clearly weaker footing and then back to likely.

No reported news explains either move. A Wall Street Journal report, carried by Reuters, said the United States struck Iran's Qeshm Island, and some U.S. officials described the strikes as defensive. That report came before the drop, but the evidence does not show it caused the move. It would not end the ceasefire on its own anyway, because the question counts only an air or surface-to-surface missile strike launched by Israel or Iran that directly hits the other's land or internal waters.

The path was choppy. Through most of Monday, traders treated a truce through Nov. 6 as all but certain. Late Monday evening, expectations dipped and recovered within minutes. The larger fall came after midnight, and the rebound followed in the next hour. A contract on the truce lasting through Nov. 7 showed the same pattern, falling and then climbing back to likely.

Longer-range expectations remain weaker than they were when this story began. A truce lasting through Nov. 15 is likely, but one lasting through Nov. 22 is now a toss-up, as is one lasting through Nov. 30. A ceasefire surviving through Dec. 31 is unlikely. Taken together, traders expect the truce to last until late November, earlier than the early December they expected when coverage began.

The background is tense. The United States and Israel began striking Iran on Feb. 28, and an April ceasefire was followed by further clashes without a lasting settlement. Axios reported Nov. 1 that Israeli Prime Minister Benjamin Netanyahu had pressed President Trump to strike Iran after the U.S. midterm elections, while Trump wanted negotiations to continue. Israel's UN ambassador denied that Netanyahu was pressing Trump. Iran's supreme leader told commanders on Oct. 31 to prepare an immediate response to any renewed attack, Axios reported.

Diplomacy continues alongside the threats. Iran and Qatari mediators have discussed a proposal to reopen the Strait of Hormuz, but there has been no breakthrough, according to reports.

The U.S. midterm elections are on Tuesday, and Trump has previously discussed the possibility of renewed strikes afterward. Mediated contacts are expected to continue this week. The ceasefire would be judged over only if Israel or Iran carries out a qualifying strike before 11:59 p.m. Iran time on Nov. 6. Threats, announcements, interceptions and a U.S. strike alone would not count.