Assessing Regime Change Risks in Iran: A Strategic Guide for Geopolitical Investors

The geopolitical landscape in Iran remains one of the most volatile and closely watched dynamics in global markets. As prediction markets like Polymarket increasingly serve as barometers for regime change risks, investors must decode these signals to navigate asset-allocation strategies in energy, defense, and emerging markets. By analyzing real-time odds for Khamenei's removal, U.S./Israel military action, and the Pahlavi dynasty's potential return, this article provides a framework for managing risk and identifying opportunities in a high-stakes environment.

1. Khamenei's Removal: A Ticking Clock for Energy Markets

The probability of Ayatollah Ali Khamenei's removal as Iran's Supreme Leader has surged in recent months, with Polymarket data indicating a 34% chance by June 30, 2026, up from 12% in December 2025. This trajectory reflects growing internal unrest, economic collapse, and the aging leader's declining influence. For energy investors, such a shift could disrupt Iran's oil and gas exports, which supply ~4% of global crude oil.

Energy firms are already recalibrating hedging strategies. As the odds of regime change rise, companies are locking in long-term supply contracts and diversifying suppliers to mitigate exposure to potential sanctions or export halts. For instance, the 35% probability of U.S. military action in Iran has prompted firms to hedge against price spikes via futures contracts. Additionally, alternative energy investments-such as solar and wind projects in the Middle East-are gaining traction as a buffer against fossil fuel volatility.

2. U.S./Israel Military Action: A Defense Sector Catalyst

The 34% chance of an Israeli military strike against Iran by January 31, 2026, and the 35% probability of U.S. intervention by mid-2026 highlight the region's fragility. These odds have driven speculative capital into defense stocks and military technology firms. Investors are prioritizing companies with exposure to drone warfare, cyber defense, and satellite surveillance-sectors poised to benefit from heightened regional tensions.

Moreover, the surge in trading volume for Khamenei's removal ($8.13 million as of January 2026) signals growing investor anxiety. This trend mirrors historical patterns where defense budgets spike in anticipation of conflict. For example, the 2023 Israel-Hamas war saw a 12% increase in defense sector ETFs. Geopolitical investors should monitor Polymarket's military action markets as leading indicators for sector rotations.

3. Pahlavi's Return: A Long-Term Play for Emerging Markets

The 27% probability of Reza Pahlavi's return to Iran by June 30, 2026, introduces a unique dynamic. Unlike abrupt regime collapses, a Pahlavi restoration would likely involve U.S. diplomatic recognition and a shift toward pro-Western policies. While this scenario remains speculative, it could stabilize Iran's economy and attract foreign investment-particularly in infrastructure and technology sectors.

Emerging market investors, however, must balance this optimism against short-term volatility. The 31% chance of the Iranian regime falling in 2026 suggests continued capital flight and currency devaluation risks. A prudent strategy involves hedging emerging market exposure with gold or U.S. Treasuries while selectively investing in Iranian assets that could benefit from post-regime-change reforms.

4. Strategic Framework for Geopolitical Investors

To capitalize on these dynamics, investors should adopt a three-pronged approach:1. Energy: Diversify supply chains and hedge against oil price spikes using futures and alternative energy investments.2. Defense: Allocate capital to defense contractors and tech firms with regional expertise, particularly in cyber and drone capabilities.3. Emerging Markets: Use prediction markets to time entry/exit points, favoring sectors resilient to short-term volatility (e.g., agriculture, pharmaceuticals).

Conclusion

Prediction markets like Polymarket are not mere speculative tools-they are real-time indicators of geopolitical risk. As Iran's political landscape shifts, investors who integrate these signals into their asset-allocation strategies will be better positioned to navigate uncertainty. The key lies in balancing short-term hedging with long-term bets on regime change outcomes, ensuring portfolios remain agile in a rapidly evolving environment.