President Donald Trump has again issued stern warnings to Iran, threatening “economic warfare” if Tehran does not comply with U.S. demands. Despite the repeated threats, no military action has been carried out. The development comes amid ongoing tensions between the two countries, according to the New York Times.

Trump’s remarks appear aimed at applying economic pressure rather than initiating direct military conflict, and they could affect the likelihood of a diplomatic agreement with Iran. The threat of economic measures, rather than military action, underscores how negotiations can hinge on non-military levers such as sanctions, enforcement, and other financial restrictions.

Market participants appear to be interpreting the warnings as reducing the probability of a successful U.S.-Iran deal in 2026. That shift is reflected in a noticeable drop in the probability that Iran Reconstruction Funding will be part of any U.S.-Iran agreement, with the latest market data showing lower confidence.

What to Watch

Monitoring developments in U.S.-Iran relations will be important, particularly any official statements from key negotiators such as U.S. Chief Negotiator Mike Vance or Iranian Foreign Minister Javad Zarif. Any confirmed military action or additional economic sanctions could further affect market probabilities.

Mediator involvement from Qatar and Pakistan is also worth watching, as their diplomatic efforts could alter the current trajectory of negotiations.

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