One of the things I’ve been watching closely is whether some of the geopolitical risks that have been hanging over markets are beginning to ease. In Iran’s case, I think the simplest way to understand what is happening is to “follow the money — but also follow the politics.”

Wars are enormously expensive. Iran has to finance military operations, support its security forces and regional allies, replace equipment and keep its domestic economy functioning at the same time. Eventually, those financial pressures begin to affect its ability to continue fighting.

We saw this earlier this year. Iran was coming under considerable financial strain and became more willing to negotiate. A temporary agreement reduced hostilities, but it also bought Iran time. Over the following four or five weeks, it was able to rebuild its financial resources, and once its war chest had recovered, attacks resumed.

Now we appear to be approaching another similar pressure point. Iran’s resources are believed to be depleted again and, almost on cue, negotiations have returned to the forefront.

The important difference this time is that the United States appears less willing to accept another short-term solution. President Trump recently rejected an Iranian proposal while still leaving the door open to further negotiations, and talks through Qatari mediators have continued. The U.S. has some incentive to believe its bargaining position improves the longer Iran remains under financial pressure. From Washington’s perspective, agreeing too quickly to another temporary ceasefire could simply allow Iran to replenish its resources and restart the conflict later. The objective would therefore be to push for something more durable rather than another pause.

But Iran has political incentives as well as financial ones.

The U.S. midterm elections are approaching, and the prolonged Iran conflict and associated higher energy costs have become a political problem for Trump and Republicans. Reuters reports that voter dissatisfaction with the war and elevated living costs has contributed to declining support for the president ahead of November.

That potentially gives Iran an incentive to drag negotiations out. From Tehran’s perspective, prolonging the conflict, or at least keeping uncertainty and energy prices elevated, could increase political pressure on Washington as the election approaches.

So we essentially have a tug-of-war.

Iran may need an agreement sooner because its financial position is deteriorating. The U.S. may believe that waiting improves its negotiating leverage. At the same time, Washington has its own clock because prolonged conflict means higher energy prices, greater market uncertainty and increasing domestic political pressure.

For investors, if financial pressure ultimately pushes both sides toward a durable agreement, one of the major geopolitical premiums embedded in oil prices could begin to decline (positive for markets). If negotiations simply produce another temporary pause, we could see the same cycle repeat (more volatility but up with an upward bias as markets have proven extremely resilient).

My view is that the probability of negotiations is clearly increasing, but the important question is no longer simply whether there will be a deal. It is whether this time the deal actually lasts.

That’s why I continue to come back to the same framework: follow the money, follow the political calendar, and understand who has the greater incentive to wait.

Mark Ting, CFP®, CIM® is a registered Portfolio Manager at Foundation Wealth Partners. Foundation Wealth Partners LP (“FWP”) is registered as a Portfolio Manager and Exempt Market Dealer in all Canadian provinces and the Yukon territory.