Ongoing military confrontation between Israel, the United States, and Iran, including large-scale airstrikes beginning in February 2026 that targeted leadership and infrastructure, has eliminated prospects for diplomatic normalization this year. No formal relations have existed since 1979, and recent direct exchanges of fire, proxy conflicts, and maritime tensions in the Strait of Hormuz reinforce trader expectations against any embassy reopening. The 96.3% implied probability for "No" reflects this entrenched hostility and absence of de-escalation or recognition signals. Late-year shifts could theoretically arise from a full ceasefire followed by new Iranian leadership pursuing engagement, though such outcomes remain distant given current battlefield dynamics and institutional barriers.