Another possibility...
""He may capitulate and go into exile just as things are beginning, he may become the victim of a coup at any time before or during hostilities, or he may fight it out using urban warfare and chemical/biological weapons. ""
I think the following is much more likely: The inspectors find nothing, or at least not enough to build the necessary case in the Security Council. Turkey mumbles its apologies. Blair is forced to back out, but has a handy excuse in the SC inaction. Bush then has to contemplate making a REALLY unilateral attack on Iraq, with loud and growing domestic opposition. He realizes that it's politically impossible.
OK, whether you agree with this or not, what happens to the Market while this unfolds? On the one hand, it's good news because there will be no war. Oil prices will drop thru the floor because Saddam will be allowed to start pumping again. On the other hand, Saddam, with his missiles and WMD's, will still be there, and he'll be a much bigger hero in the Arab world.
Seems to me that the Market will react very positively at first, then increasingly negatively as the unhappy reality sets in.
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