Mugwort contains thujone and wormwood oil, both present in absinthe, which also has a reputation for inducing dreaminess, amongst other things. There's no actual scientific evidence that those two chemicals induce dreams, much less prophetic ones, but their reputation still stands amongst those who have used them.
I've smoked mugwort, and I suffered no ill effects other than it tastes pretty rank and can rather make ya cough hard, both on its own and in a commercial smoking blend. I've also inhaled it from a censer, same deal, but it produces more smoke. Both were equally efficacious in my experience. I can't say that the dreams I had were prophetic ones, but they were generally more vivid and reasonably pleasant, but, as with all things potentially psychotropic, your mileage may vary.
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