Iran peace deal odds collapse 28pp; energy sector hasn't repriced the de-escalation risk

**ANGLE C: 7-DAY DRIFT IS A LEAKED SIGNAL.** The Polymarket collapse from 62% to 34% (-28.0pp) over 7 days is a massive move with no matching public headline. No major US-Iran escalation, no Trump policy reversal announcement, no Iranian military action—yet the crowd has repriced peace deal odds by nearly half. This is nearly textbook informed flow: insiders with access to diplomatic channels or military intelligence are front-running a deterioration in US-Iran relations that has NOT yet reached mainstream news or equity markets. XLE (Energy Select Sector ETF) is up +3.3% over the same week, driven by broader oil strength (+13.2% WTI) and risk-on sentiment. But this rally masks a critical gap: if the Polymarket signal is correct (deal odds collapsing = escalation risk rising), then energy equities should be pricing in *lower* geopolitical risk, not higher. The prediction market is screaming deterioration; XLE is behaving as if tensions are stable or easing. Once the news breaks—whether as a failed diplomatic round, a new Iranian military test, or explicit US policy hardening—equity markets will reprice energy lower by 2-4%. The lag between prediction-market signal and equity repricing is where the alpha lives. The trade is to short energy now, before the crowd catches up.

The strongest case against this trade: the Polymarket move could be driven by a shift in base-case assumptions about US political willingness to negotiate (e.g., a Trump re-election scenario or a shift in administration stance), not by new intelligence about Iranian actions. If that's the driver, energy may not reprice lower—it might reprice *higher* on a 'Trump toughness' premium. Second, XLE's +3.3% rally is real and driven by genuine oil strength ($94.88, +13.2% WTI), which could persist regardless of geopolitical headlines. The most vulnerable assumption in the chain is that the Polymarket move reflects *leaked intelligence* rather than a shift in political calculus. If a major US official announces a hardline Iran policy tomorrow and explicitly rules out a deal, the prediction market move is justified, but XLE may not fall—it could rally on the clarity. Watch for leaked diplomatic cables or Iranian military activity; those would confirm the informed-flow thesis.