For eight months, every Iran headline has come with the same two-way trade: peace deal on Monday, “locked and loaded” by Friday.
This week was no exception: Monday, November 9 was the date that a handful of media reports had penciled in for the resumption of major US strikes (a new moon, three carriers on station, the midterms safely in the rearview mirror). Instead, President Trump walked out of a meeting with Qatar’s prime minister and told reporters that military action against Iran does not seem necessary at this point, one day after telling CNN that new bombing is “highly unlikely” if talks progress. Stocks responded with an everything rally, with the S&P closing up 2.4%, while Brent slid back below $95, extending what was already its biggest weekly drop since the Covid crash.
And yet, in the same 72 hours the US carried out what Trump called “minor” strikes on Qeshm Island (which have continued since), the IRGC reported three more tankers ablaze in the Strait of Hormuz (with more tankers catching fire through Friday), a Houthi missile damaged an Aramco tower in Riyadh, Saudi Arabia’s East-West pipeline was hit in the Medina region, and Secretary of State Rubio said no breakthrough was in sight. Peace, in other words, is going great.
Which brings us to the best single piece of sell-side work we have seen on where this war goes next. In a note published on election day and titled “Lots of Variables in Resumption of Middle East War. The Nuke Question” (available to pro subs), Capital Alpha’s veteran defense analyst Byron Callan does something that very few of his peers have been willing to do: he admits he has no idea whether the US and Israel hit Iran at scale again in November or December, and then explains why the answer may matter less than what the next round would cost. As he puts it:
Maybe the U.S. and Israel strike Iran at scale again in Nov.-Dec. 2026, and maybe they don’t. Markets seem to have fainting spells every time there is hope of a peace deal, but there is precedent for negotiations being abruptly cut off as strikes commence.
In other words, the market keeps pricing the last headline, while the people with the bombers keep their options open. Regular readers will recall that negotiations were also “progressing” in late February, right up until the morning of February 28.
And then there is the part of the note that gave it its title. Callan very much doubts that Washington would ever use a nuclear weapon on Iran’s deepest bunker, but in his words the possibility “cannot be 100% ruled out.” When the dean of Washington defense research feels the need to put that sentence in writing, well, it is probably worth reading the rest.
