The extremely low near-term probability (only 4% before June 15) suggests the market believes the chances of reaching a substantive agreement within the next two weeks are next to none. The 22% probability before June 30 reflects the market’s cautious stance toward Trump’s “an agreement within a week” statements. Notably, the 76% probability by December 31 implies that even if short-term negotiations repeatedly stall, the market still leans toward resolving the Strait’s navigation issue within the year.
This probability structure itself is an important risk warning: while the probability of tail risk (the Strait remaining closed for the long term) is only 24%, its impact on global energy supply chains and inflation expectations far exceeds what would be seen in normalized scenarios.
Where does the fundamental disagreement in US-Iran negotiations actually lie
On June 1, the trigger for Iran to pause dialogue with the United States via intermediaries was an escalation of Israel’s campaign in Lebanon. Iran stated clearly that it would not return to the negotiating table amid ongoing fighting within Lebanon. This position reflects Iran’s strategy of deeply linking the security interests of Hezbollah in Lebanon with its own negotiation process.
From the US side, Trump emphasized in his public remarks on June 2 that he had separately contacted the leadership of Hezbollah in Lebanon and Israeli Prime Minister Benjamin Netanyahu, urging both sides to stop firing. Trump said Hezbollah agreed to stop firing at Israel, and Israel also agreed to stop large-scale strikes on Beirut. However, Netanyahu later said that the Israel Defense Forces would continue military operations in southern Lebanon as planned.
This contradiction reveals the tactical divergence between the US and Israel: the US wants to quickly restore navigation through the Strait on the premise of “a comprehensive ceasefire,” in order to dampen energy prices and inflation expectations; Israel, meanwhile, insists on maintaining military pressure in southern Lebanon to eliminate Hezbollah’s capability to carry out cross-border attacks. This fundamental disagreement significantly raises the threshold for reaching a direct US-Iran agreement in the short term.
How the pulse-like rise in crude oil prices transmits to US inflation expectations
Brent crude briefly broke above $97 per barrel after news emerged on June 1 that Iran paused negotiations. It then gave back part of its gains after Trump’s remarks, ultimately closing around $95 per barrel. The Strait of Hormuz is one of the world’s most important oil shipping routes, with daily throughput accounting for about 20% of global seaborne crude oil trade. Any substantial disruption to navigation would directly hit global crude oil supply.
Energy prices are a key input variable for core inflation. When oil prices rise by 7% or more in a short period, the impact transmits down the supply chain: higher transportation costs push up prices of all goods, sharply increasing cost pressures for industries such as chemicals, aviation, and logistics. Ultimately, this is reflected in the energy component of CPI and in core goods categories.
The market’s reaction to inflation expectations first shows up in the Treasury market. On June 1, the US Treasury market, with a size of $31 trillion, saw a sell-off. The yield on the 10-year Treasury rose by about 6 basis points to nearly 4.5%, and the yield on the 2-year Treasury also rose by about 6 basis points to 4.07%. Rising yields indicate that bond investors are pricing in higher inflation and tighter monetary policy.
What signal does the US Treasury yield curve send about rate hikes?
Swap market data shows that traders have fully priced in one rate hike by March 2027, and they believe the earliest chance of a rate hike is October 2025 at 50%. This change in expectations is worth close attention: just a few weeks ago, the mainstream narrative in the market was about when the rate-cutting cycle would begin.
The 2-year Treasury yield is most sensitive to expectations for Fed policy. Its daily increase of 6 basis points, combined with the synchronized rise in the 10-year yield, suggests the market is reevaluating the direction of the Fed’s next move. If the closure of the Strait of Hormuz causes oil prices to remain above $95 per barrel, energy-driven inflation pressure may force the Federal Reserve to tighten monetary policy again—even if conditions in the labor market have not yet cooled significantly.
For crypto markets, a warming rate-hike outlook implies further upward pressure on the US dollar’s real interest rates, which directly suppresses the valuation center of risk assets. The yield on holding stablecoins relative to other options declines, and rising borrowing costs also curb demand for leveraged trades.
How strong is the real constraint of Trump’s intervention and mediation?
On June 2, Trump said he believes an agreement with Iran will be reached “within the coming week” to extend the ceasefire period and reopen the Strait of Hormuz. He also revealed that he had talked with representatives of Hezbollah’s leadership in Lebanon, and they agreed to stop firing at Israel, while Israel also agreed to stop firing.
However, it is necessary to examine the actual binding power of this statement. Trump said he “spoke” with Hezbollah and demanded they not fire, but as a non-state actor, Hezbollah’s decision chain is not fully transparent. On Israel’s side, even though Trump asked Netanyahu not to launch large-scale attacks on Beirut, Netanyahu stated clearly that the IDF would continue military operations in southern Lebanon. This means there is ambiguity in the scope and definition of “stopping fire.”
In addition, Trump himself acknowledged that no formal memorandum of understanding has been signed yet, because “a few key detail clauses still need to be worked out.” These details may include the security guarantees demanded by Iran, Israel’s authorization for actions in southern Lebanon, and economic compensation to Iran from Gulf states. Until key clauses are implemented, “reaching an agreement within a week” is closer to a political statement than to a certain commitment.
How will the path of a geopolitical premium decline affect crypto markets?
Assuming the Strait of Hormuz restores navigation within the next several weeks, the geopolitical premium already priced into asset values would be released quickly. Crude oil prices could see a 10% to 15% pullback; inflation expectations would cool accordingly; and US Treasury yields would reprice downward. This scenario is a liquidity positive for crypto markets: easing rate-hike expectations would reduce US dollar real interest rates, lowering valuation pressure on risk assets.
Conversely, if the Strait still cannot return to normal by the end of June, and the 22% probability scenario becomes reality, energy prices could enter a second wave of increases. At that time, the market would shift from expecting “short-term shocks” to expecting “mid-term supply disruptions,” and the upside in inflation expectations would expand significantly. The Federal Reserve’s policy dilemma would become even sharper: the trade-off between fighting inflation with rate hikes and maintaining economic growth becomes harder. In this scenario, crypto markets may first experience risk-off selling (as liquidity tightening expectations rise), and then search for a new balance point amid expectations of fiat currency depreciation.
The 76% annual probability of restoration given by the Gate prediction market essentially tells traders: the probability of extreme scenarios is limited, but if they occur, the impact will be profound.
The probability of the Strait of Hormuz returning to normal traffic by the end of June is 22%. This is the integrated pricing formed by market funds after factoring in the dynamics of US-Iran negotiations, Israeli military actions, and the effect of US mediation. The Trump administration is pushing hard for “an agreement within a week,” but localized conflict between Israel and Hezbollah is still ongoing, key clauses have not been implemented, and near-term uncertainty remains high.
No matter which time node the Strait ultimately returns to normal navigation, this event has already sent two clear signals to crypto markets: geopolitical risk can transmit rapidly to inflation expectations and the monetary policy path through energy prices; and a prediction market, as an information-aggregation tool, can provide quantifiable probability references in complex events. In future macro narratives, traders need to incorporate similar geopolitical risk nodes into their analysis framework rather than viewing them as isolated news events.
How should crypto traders hedge tail risks from similar geopolitical events?
The Strait of Hormuz event provides a typical example of geopolitical tail risk. Crypto traders can build hedging strategies from the following dimensions:
- First, pay attention to the information-aggregation function provided by the prediction market itself. Changes in probabilities in the Gate prediction market are real-time feedback on event progress. Traders can use these probabilities as one of the reference signals for adjusting positions.
- Second, build monitoring for cross-asset correlations. When crude oil and US Treasury yields rise at the same time, it indicates the market is pricing “geopolitically driven inflation,” and crypto assets typically face valuation pressure. When crude oil rises and US Treasury yields fall, it is generally more favorable for crypto’s risk-off narrative.
- Third, use options and other tools reasonably to manage extreme risks. Tail scenarios with low probability before the event (such as the Strait remaining closed for more than 6 months) often have actual impacts that exceed what conventional positions can withstand. By modestly allocating out-of-the-money put options or using stablecoins for hedging, traders can protect against large drawdowns from extreme scenarios without significantly lowering normal returns.
FAQ
Q: Are the probability data from the Gate prediction market reliable?
The probabilities from prediction markets reflect participants’ collective judgment rather than certain predictions of the future. Their value lies in turning dispersed information into trackable price signals, helping traders identify changes in market consensus.
Q: Will the closure of the Strait of Hormuz directly affect crypto mining costs?
The main cost of crypto mining is electricity. If a closure of the Strait causes global oil prices to keep rising, natural gas prices typically rise as well, which in turn affects the operating costs of some mines that rely on natural gas power. However, this transmission chain is long, and the energy mix used by mines differs significantly across regions.
Q: How should traders use prediction market data to make decisions?
Prediction market probabilities can be used as one of the reference signals for adjusting positions. When the probability of a scenario rises or falls rapidly, traders can review whether their portfolio has already sufficiently priced in that change. It is not recommended to use prediction market probabilities as the only basis for trading; instead, traders should make integrated judgments by combining macro data, technical factors, and their own risk tolerance.
