Prediction markets have rapidly adjusted the perceived odds of US escalation in the Iran conflict, offering traders a real-time gauge of geopolitical risk.
Platforms like Polymarket and Kalshi saw probabilities shift instantly as Donald Trump balanced fresh threats with hints of possible negotiations on Sunday. At the same time, Bitcoin rose more than 3.5% on Monday.
According to Sygnum Bank chief investment officer Fabian Dori, prediction markets are no longer a niche tool during geopolitical crises. Instead, professional trading desks are increasingly relying on them to assess macro risk in real time.
“Prediction markets price discrete, named outcomes with real capital behind them,” Dori said, noting that crypto markets—often driven by binary events such as regulation, geopolitical developments, and protocol upgrades—benefit from this kind of signal.
During the Iran conflict escalation, shifts in prediction market odds around de-escalation reportedly occurred before mainstream financial media caught up, and showed a direct correlation with Bitcoin’s price movements.
Dori added that some trading desks now incorporate prediction markets into their macro frameworks alongside indicators like funding rates, options data, and capital flows. The integration of Kalshi’s data into investment strategies by ARK Invest further highlights how event-based probabilities are becoming part of mainstream institutional decision-making.
In regulated settings, prediction markets are increasingly used as a contextual layer—helping teams frame risk scenarios rather than acting as direct trading signals. According to Fabian Dori of Sygnum Bank, the objective is to decide on a course of action before events unfold, with continuously updated, capital-weighted probabilities of outcomes like war, sanctions, or ceasefires fitting naturally into that approach.
The scale of activity has also surged to a level that institutional investors can no longer ignore. In March alone, prediction market transactions reached around 191 million—up 2,838% year-on-year—while monthly notional volume climbed to approximately $23.9 billion.
Traditional financial players are taking notice. Intercontinental Exchange, which owns the New York Stock Exchange, made a $600 million investment in Polymarket on March 27, underscoring growing institutional confidence in the sector.
“This is no longer a niche product,” Dori said, noting that the key question for professional investors is no longer whether to monitor markets tied to geopolitical events like Iran, but how to integrate them in a way that adds meaningful analytical value rather than noise.
However, the rapid growth is also bringing increased scrutiny. Reports that six Polymarket traders earned roughly $1 million by betting on the timing of US strikes on Iran in late February have raised concerns about potential insider trading.
The platform has also faced backlash over sensitive markets, including one tied to a missing US pilot, which it removed following public criticism over the nature of such wagers.
