The Oman Fake-Out: How Polymarket Priced Khamenei's Death at 7.5 Cents the Morning Before It Happened

At 2:31 AM UTC on February 27, 2026, the Yes token for "Will US or Israel strike Iran by February 28, 2026?" touched 7.5 cents. That's 7.5% implied probability. The Oman foreign minister had announced a diplomatic breakthrough hours earlier — Iran had agreed to full IAEA verification, peace was "within reach." The crowd believed it.

Less than 24 hours later, U.S. and Israeli jets dropped over 1,200 munitions across 24 Iranian provinces. Khamenei was dead. The Yes token closed at $0.9995.

The mispricing wasn't stupid. It reflected genuinely available information. That's what makes it worth studying.

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The Two-Month Setup

The story starts in December. The "Khamenei out as Supreme Leader of Iran in 2026?" market opened in late December at 36.5 cents and spent most of January climbing. Here's the full daily arc:

The January 14 peak at 64¢ is interesting on its own — the crowd was pricing in a 64% probability that Iran's supreme leader would be out by year-end, based almost entirely on the protest wave and economic collapse. That's actually a pretty remarkable baseline for a sitting head of state.

What happened next is even more interesting. When Oman entered the picture and diplomatic channels opened, the market gave back ~13 cents in 48 hours. This wasn't irrational — a credible mediation channel genuinely lowers the risk of regime-ending conflict. The crowd correctly updated on new information.

The problem wasn't the update. It was the magnitude.

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The Oman Fake-Out in Detail

Run this against the polymarketdata.co API to see the exact intraday sequence on the strike market:

import os
import requests
import pandas as pd

API_KEY = os.environ["POLYMARKETDATA_API_KEY"]
BASE = "https://api.polymarketdata.co/v1"
HEADERS = {"X-API-Key": API_KEY}

# "Will US or Israel strike Iran by Feb 28, 2026?" — Yes token
STRIKE_SLUG = "will-us-or-israel-strike-iran-by-february-28-2026-766"

prices_r = requests.get(
    f"{BASE}/markets/{STRIKE_SLUG}/prices",
    headers=HEADERS,
    params={
        "start_ts": "2026-02-20T00:00:00Z",
        "end_ts": "2026-03-01T00:00:00Z",
        "resolution": "1h",
        "outcome": "Yes",
    },
    timeout=30,
)
prices_r.raise_for_status()
prices = pd.DataFrame(prices_r.json()["data"])
prices["t"] = pd.to_datetime(prices["t"], utc=True)
prices = prices.sort_values("t").reset_index(drop=True)

# The floor
print(prices.loc[prices["price"].idxmin()])
# t       2026-02-27 02:31:00+00:00
# price   0.075

Here's the full price sequence on the strike market over the final 72 hours before the deadline:

The 7.5¢ floor on Feb 27 at 02:31 UTC corresponds to the hours immediately after Oman Foreign Minister Badr Al-Busaidi's statement. The market was this close to pricing the strikes as a rounding error.

To put that in dollar terms: if you had put $10,000 on Yes at 7.5¢, you were up $123,000 by the time the market closed at ~99.95¢. The expected value of knowing that the Oman announcement was a geopolitical feint was enormous.

The Khamenei out market didn't crash as hard — it bottomed around 40¢ in early February and recovered to 47.5¢ by Feb 26. That's a more liquid, longer-dated market with a harder-to-fake signal (it resolves yes on any leadership change, not just a military strike by a specific date). It ended up being the cleaner instrument.

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The Crowd Now: What Iran's Open Markets Say

All of this happened. The question traders actually care about is what comes next. Here's where the open markets stand as of March 1, 2026:

# Pull current prices on all open Iran-related markets
import os, requests, pandas as pd

API_KEY = os.environ["POLYMARKETDATA_API_KEY"]
BASE = "https://api.polymarketdata.co/v1"
HEADERS = {"X-API-Key": API_KEY}

slugs = {
    "Regime fall by June 30":       "will-the-iranian-regime-fall-by-june-30",
    "Regime fall before 2027":      "will-the-iranian-regime-fall-by-the-end-of-2026",
    "Strait of Hormuz by June 30":  "will-iran-close-the-strait-of-hormuz-by-june-30",
    "US invades Iran before 2027":  "will-the-us-invade-iran-before-2027",
    "SL position abolished":        "will-the-position-of-supreme-leader-of-iran-be-abolished",
    "No new Supreme Leader by Jun 30": "will-there-be-no-new-supreme-leader-of-iran-by-june-30",
    "Reza Pahlavi next SL":         "will-reza-pahlavi-be-the-next-supreme-leader-of-iran",
    "Mojtaba Khamenei next SL":     "will-mojtaba-khamenei-be-the-next-supreme-leader-of-iran-573",
    "Hassan Khomeini next SL":      "will-hassan-khomeini-be-the-next-supreme-leader-of-iran",
    "Reza Pahlavi leads Iran 2026": "will-reza-pahlavi-lead-iran-in-2026",
}

rows = []
for label, slug in slugs.items():
    r = requests.get(f"{BASE}/markets/{slug}/prices",
                     headers=HEADERS,
                     params={"resolution": "1m", "outcome": "Yes"},
                     timeout=30)
    if r.ok:
        data = r.json()["data"]
        if data:
            rows.append({"market": label, "price": data[-1]["price"]})

df = pd.DataFrame(rows).sort_values("price", ascending=False)
print(df.to_string(index=False))

A few things jump out immediately.

The market is saying there is a 92.25% implied probability that Iran has a new Supreme Leader by June 30. That's derived from "No new Supreme Leader by June 30" sitting at 7.75¢ — bet the yes if you think the transition takes longer. With Iran's constitution requiring the Assembly of Experts to convene immediately after a Supreme Leader's death, the market is almost certainly right on the timing, even if regime structure changes.

Mojtaba Khamenei — Khamenei's son and the most discussed "succession" candidate before the strikes — sits at just 8.25¢. The crowd is pricing in that a hereditary theocratic succession in the chaos of a joint US-Israeli military campaign is a low-probability outcome.

The Reza Pahlavi numbers are fascinating. "Reza Pahlavi next Supreme Leader" at 0.75¢ tells you the crowd doesn't think the opposition-in-exile is leading the country in any formal capacity — even as "Reza Pahlavi leads Iran in 2026" sits at 19¢. That 18-cent gap between the two is the market's estimate of the probability that Pahlavi ends up in some leadership role that isn't the Supreme Leader title specifically.

The Strait of Hormuz at 36.2¢ is the sleeper number here. Iran controls the strait and has already launched missile salvos at Gulf state US bases. A third of the world's seaborne oil transits through that chokepoint. At 36 cents — one of the most consequential "Yes" outcomes in the entire cluster — that market is worth watching closely.

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The Calibration Question

Here's the honest takeaway for anyone thinking about prediction market reliability: the markets didn't fail here in the way critics would claim.

The "strike by Feb 28" market at 7.5¢ wasn't some spectacular crowd delusion — it accurately reflected publicly available information about a credible diplomatic channel. The problem was that the diplomatic channel turned out to be a fake-out, or at minimum, that military planners had already crossed a point of no return before the Oman announcement.

Markets can only price what's knowable. If a government announces a peace deal while simultaneously giving the green light to strike, markets will misprice it every time.

What you can use: the Khamenei out market held above 40¢ even at peak diplomacy optimism. The longer-dated, regime-level market never fully bought the peace narrative. That's the instrument that gave you the cleaner signal — not because it was smarter, but because its resolution condition was broader and harder to obscure with a single diplomatic statement.

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The Forward Trade

If you're positioning on the open markets right now, the most interesting spread is regime fall by June 30 (42.5¢) vs. regime fall before 2027 (56.5¢). The 14-cent gap implies the market is pricing significant probability mass on a drawn-out collapse — something that happens in H2 2026 but not by June 30. That seems reasonable given how messy Iranian power transitions historically get. The Assembly of Experts, the IRGC, whatever remains of the civilian government, and now a US military campaign all have overlapping and conflicting authority. Six months might not be enough.

The Strait of Hormuz market is the one to watch as a macro hedge. At 36¢, it's cheap insurance against a scenario that would send oil to $150 and blow up a dozen other positions. If you're long anything levered to stable Middle East supply chains, that's worth modeling.

What no one knows yet — including Polymarket — is who is actually running Iran right now.

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All data from the polymarketdata.co API. Prices as of March 1, 2026. Full endpoint reference at polymarketdata.co/docs.