Five days before Iran suspended the agreement, the Israel Security Index showed that nearly its entire peace dividend had disappeared.

Iran formally suspended the Islamabad Memorandum of Understanding Saturday morning. Five days earlier, prediction markets were already showing the agreement coming apart.

The Israel Security Index, which I created to aggregate 40 live prediction-market contracts related to Israel’s security, finished last Monday at 502.66. Five hundred is neutral. Shortly after the MOU was signed, the index had reached 529.54. In less than a month, almost the entire peace dividend had disappeared.

The deterioration was broad. The ISI’s Active Front cluster fell 21.27 points in a single week. Strategic Support fell 28.45 points, and Governing Capacity fell 30.79 points. The fourth cluster, Regional and Existential Risk, appeared to improve by 13.61 points, but that was a break in the data series. An old Beirut contract had resolved, and a replacement military-action contract entered the index at 45 percent. Strip out that substitution and all four clusters deteriorated.

The individual contracts were saying much the same thing. The probability of a comprehensive US-Iran agreement stood at only 8.3 percent. The probability that Iran would cease implementing the MOU was 27.5 percent. The probability that Iranian airspace would reopen was only 19 percent.

None of those numbers alone predicted the exact timing or wording of what Iranian Deputy Foreign Minister Kazem Gharibabadi would say five days later. Markets are not clairvoyant, and 27.5 percent is not certainty. But the contracts, taken together, showed that the events required to keep the MOU alive were becoming less likely at the same time.

This is where prediction markets can see something diplomatic commentary often misses. Diplomats analyze the document the parties signed. Markets price the events that must occur for the document to mean anything. The diplomats saw one agreement. The markets saw four separate vetoes.

A Four-Leg Geopolitical Parlay

The MOU depended on progress in four areas: safe passage through the Strait of Hormuz, a verifiable nuclear settlement, limits on Iran’s proxy network and an arrangement for Israeli withdrawal from southern Lebanon. Failure on any one could destroy the agreement.

Anyone who has spent time around gambling understands the problem. Four outcomes that each look individually plausible do not necessarily produce one likely combined outcome. They produce a parlay, and every leg has to hit.

In this case, the legs were not independent. They were wired together in ways that made each concession dependent on somebody else conceding first. Israel would not withdraw from southern Lebanon before Hezbollah disarmed.........

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