Scenarios - How will Thai crisis pan out after ultimatum?

BANGKOK (Reuters) - A peace plan to end weeks of deadly protests in Thailand is in limbo after "red shirt" protesters accepted the offer of an early election in November but added conditions the government seems unlikely to meet.

Prime Minister Abhisit Vejjajiva has told the "red shirts" to disperse by Wednesday and the authorities say they will start to choke off supplies to the central Bangkok protest camp from midnight in an attempt to squeeze the protesters out.

Here are broad scenarios that may develop in coming days and possible financial market reaction.

RED SHIRTS STAY PUT, GOVERNMENT ACTS TO SQUEEZE THEM OUT

This looks the most likely immediate scenario. The protesters are not leaving their fortified camp in a Bangkok shopping district and the authorities say they will start to cut off supplies and utilities to the area from midnight on Wednesday.

Troops may man most of the checkpoints around the camp -- police having failed to do the job seriously up to now -- and could stop food, drinking water and fuel going in. Protesters, especially women and their children, may start to drift away.

But the process is fraught with difficulties. For a start, the protesters have their own power generators. And how will the authorities cut off tap water and electricity to the area without inconveniencing nearby embassies and apartment blocks?

The swanky shopping malls and luxury hotels in the area have had to close for a month, losing millions of dollars in revenue, but there have been no reports of theft or looting. That could all change as people get angry and hungry.

Hardliners among the red shirts could confront the security forces at the checkpoints. Some protesters are thought to have firearms and grenades. More deadly clashes could result.

MARKET REACTION: The stock market reacted positively to news the army was planning action to end the protest, but the short-term trend could depend on whether force is used and the number of casualties.

If the rally is dispersed more or less without bloodshed, the commercial district reopens, tourists return and consumer confidence picks up, the stock market is likely to benefit.

Previous bouts of violence have spooked investors and the stock market could react negatively if troops use force.

Foreigners, active buyers from February to early April, have started selling fairly heavily. They have offloaded 17.4 billion baht (358.3 million pounds) of stock in the past five sessions, cutting their net buying this year to 21 billion baht as of Tuesday.

Bond yields have risen whenever a resolution was in sight, with investors expecting the central bank to raise interest rates once some sort of normality returned. Finance Minister Korn Chatikavanij said the same thing on Wednesday.

The central bank next meets on June 2. If there is a quick end to the conflict, speculation about a rate rise from a record low 1.25 percent will focus on that date and yields could rise.

Five-year credit default swaps widened by 6 bps to 116/121 as the tension rose on Wednesday and could widen further if there is a military crackdown, although these instruments may be influenced just as much by broader forces, such as the euro zone debt problems.

The baht has been remarkably impervious to political events since March, finding support from a strong recovery in exports and a big current account surplus. That is likely to continue in the short to medium term.

RED SHIRTS STAY PUT, TROOPS MOVE IN, BLOODY CLASHES RESULT

The chances of this happening are higher than at any time since the occupation of the commercial district began on April 3.

The army has said it could use force if the protesters do not disperse and "soft" measures such as stopping food and water supplies fail. The "red shirts" say they're still not going.

If there is a crackdown, the army seems bound to prevail, but there could be heavy casualties on both sides from fighting in a fortified encampment with narrow lanes and few exits -- one reason why the army has held back until now.

New protests are quite likely to start up elsewhere in Bangkok or, more likely, in the reds' northern strongholds. MARKET REACTION: As above, heavy casualties would spark selling in the stock market. The prospect of unrest spreading around the country and the social divide between rich and poor deepening may also have a negative longer-term impact.

Money might shift into the relative safety of government bonds, pushing yields down, but a return to normal economic life in the capital may give the central bank room to raise interest rates on June 2 or July 14, so bond yields would eventually rise.

The baht might suffer a little if inflows into stocks dried up, but it has broadly held a range between 32 and 32.50 per dollar since mid-March and that could prevail for some time.

GOVT AND "RED SHIRTS" REACH AGREEMENT, ELECTION IN NOVEMBER

If a deal is accepted by most red shirt leaders and then by the rank and file, there could be a big relief rally on the stock market and bond yields would rise as money shifted into shares.

This is looking less and less likely, although Abhisit has not yet formally withdrawn his offer of a November 14 election.

Even if it happens, no one expects underlying socio-political problems to go away and further flare-ups are probable before, during and after the next election.

TROOPS MOVE IN, RED SHIRTS GIVE UP WITHOUT A FIGHT

This happened in April 2009 when, surrounded by troops after a three-week blockade of the prime minister's office, hundreds of red shirts surrendered.

The stock market could jump if it happened again, but it seems unlikely this time, not least because there may well be thousands of protesters now, and some will be armed.

CONTINUED STALEMATE

This seems unlikely: having held back for two months and then offered an election a year early, the authorities will probably say enough is enough and break up the rally. The government is coming under pressure from its own supporters to do so.

There is, however, still a chance things will drag on for a while as the authorities try to tighten the noose, and if security forces remain reluctant to go on a full-out offensive.

MARKET REACTION: In that event, share prices will remain under a cloud, with large daily falls in reaction to any violence. Hotel, retail and tourist-related stocks such as Airports of Thailand would stay under pressure.

Bond prices might pick up a little and yields drop back as doubts grew over the chances of a rate rise in June or July.