Ongoing military confrontation, including the February–May 2026 U.S.-Israeli airstrikes on Iran that killed Supreme Leader Ali Khamenei and prompted Iranian retaliation, has entrenched hostility and eliminated any near-term path to diplomatic normalization. Formal ties were severed after the 1979 revolution, with Iran transferring the former Israeli embassy in Tehran to the PLO and designating Israel an adversary; no restoration has occurred despite decades of indirect contacts. Traders assign the “No” outcome 96.2 percent probability because structural barriers—mutual non-recognition, proxy conflicts, and unresolved disputes over nuclear and missile programs—persist without credible de-escalation mechanisms before December 31. Only an unanticipated comprehensive agreement, regime transition producing a government willing to normalize, or external mediation yielding formal ties could alter this trajectory within the resolution window.