Iran Tensions Ease as US and Tehran Halt Strikes for Second Day
Iran tensions have shown signs of easing as Iran’s Supreme Leader Mojtaba Khamenei stated that any peace deal between Tehran and the United States depends on Israel ending its attacks on Lebanon, with both sides pausing strikes for a second day to allow space for diplomacy.
Khamenei Links US-Iran Peace to End of Israeli Attacks on Lebanon
Iran’s Supreme Leader Mojtaba Khamenei has said that peace between Tehran and the United States is contingent on Israel stopping its attacks against Lebanon. [1] Khamenei made the statement on X on Sunday. [1] Iran “has designated the preservation of Lebanon’s territorial integrity, and the absolute, unconditional termination of the Zionist regime’s aggression as the primary condition for any agreement to ending the imposed war against the aggressive US,” he wrote. [1] Khamenei also voiced his support for the Lebanese group Hezbollah, its former leader, Hassan Nasrallah, and the people of southern Lebanon – the focal point of Israel’s attacks – in a series of posts. [1] “The Islamic Republic of Iran considers the defense of these oppressed yet powerful mujahideen [of Hezbollah] to be its strategic mandate,” Khamenei said. [1] Khamenei’s intervention comes amid reports of a halt to attacks and renewed diplomacy between Tehran and Washington. [1] Iran has consistently made an end to Israeli strikes on Lebanon a precondition for ending the war, a demand enshrined in the first clause of the Memorandum of Understanding signed between the two countries in June. [1] That agreement has since collapsed amid a dispute over the Strait of Hormuz. [1] Lebanon was drawn into the conflict in March after Hezbollah launched strikes on northern Israel, citing both the killing of then-Supreme Leader Ali Khamenei on the war’s first day, February 28, and Israel’s near-daily bombardment of Lebanese territory – attacks it says violated a ceasefire that had ended an earlier round of hostilities in 2024. [1] On June 26, following the signing of the US-Iran MoU, Lebanon and Israel signed a US-mediated framework agreement stipulating a phased Israeli withdrawal from occupied Lebanese territory, but without a timetable for the withdrawal. [1] Instead, it said Israel will withdraw from occupied territories once Hezbollah is disarmed. [1] Iran and Hezbollah have rejected the deal. [1] While the first phase is Israel’s withdrawal from three “pilot zones”, the Lebanese army said on Sunday that Israeli forces are obstructing the process, including by refusing to withdraw from designated territories. [1] As of Sunday, Israel was still bulldozing, shelling and conducting combing operations with machineguns across large areas of southern Lebanese territory it is occupying. [1] At least 4,329 people have been killed, while 37 Israeli soldiers and four Israeli civilians have died in the latest round of violence in Lebanon. [1] Israel violated a previous ceasefire between Hezbollah and Israel more than 10,000 times, according to UN peacekeepers. [1] Mojtaba Khamenei is the son of the former Iranian Supreme Leader Ali Khamenei. [1] He was selected as supreme leader after the US and Israel’s assassination of his father. [1] Khamenei’s statement on Lebanon comes as war spreads into Yemen, with reports of an exchange of attacks between the Houthis and Saudi Arabia. [1]
US and Iran Observe Second Day of Paused Strikes
President Donald Trump has paused attacks on Iran for the second night in a row to give diplomacy more time, the US ambassador to the UN said. [2] Speaking to Fox News on Sunday, Ambassador Mike Waltz said the president was "giving talks some space; he's giving it a little bit of room". [2] An Iranian army spokesperson said on Sunday that Tehran had halted "retaliatory" attacks in the region in response. [2] The pause follows nearly two weeks of daily US strikes and tit-for-tat attacks, effectively unravelling the ceasefire struck in June. [2] Asked whether Trump had decided against escalation for now, Waltz told NBC: "I wouldn't go that far at all. The president is keeping all options on the table." [2] Waltz also rejected reports in the New York Times that administration officials had warned expanding hostilities could dangerously drain a diminished stockpile of air defence munitions. [2] "The US military... has everything that it needs to conduct this campaign as effectively as it needs to be," he said. [2] As of Sunday evening, Trump had not spoken publicly on the latest developments, but earlier posted computer-generated images on his Truth Social account that depicted US military planes bombing Iranian ships and Kharg island. [2] Iran will halt its own attacks as long as the United States does the same, a senior Iranian official said on Sunday. [5] The development comes as the United States pressed pause on its bombing campaign after President Donald Trump’s advisers told him they were running out of targets and expressed worries about depleting the U.S. arsenal. [5] After 13 nights of intensifying U.S. airstrikes on Iran, the Pentagon suspended the campaign late on Friday, with no U.S. attacks reported on either Saturday or Sunday. [5] Iran, which had been following each night of U.S. attacks with its own strikes on neighboring countries that host U.S. bases, has also so far held fire for two days. [5]
Diplomatic Efforts Focus on Strait of Hormuz
Iran and Oman held several rounds of technical talks in Tehran on Friday and Saturday to discuss management of the Strait of Hormuz, according to Iranian foreign ministry spokesman Esmail Baghaei. [2] Disputes over control of the strait reignited US-Iran tensions earlier this month and it remains a major block to permanently ending the war. [2] Iran and the US signed a memorandum of understanding in June to halt military operations and reopen the strait, as well as to reach an agreement to end the war over the following 60 days. [2] But after Iranian forces attacked tankers in the Strait of Hormuz on 13 July, the US resumed airstrikes on the country and reinstated its naval blockade on Iranian ports. [2] Iran retaliated with attacks on US military facilities and bases across the Middle East, killing four American soldiers. [2] The US strikes have since killed dozens of people, according to Iran's health ministry. [2] In the UK, new Defence Secretary Wes Streeting said he would meet his US counterpart Pete Hegseth in the coming week to discuss the strait, which is one of the world's key transport routes for oil, liquid natural gas and other essential commodities. [2] "When it comes to securing maritime freedom and free commercial shipping in the Strait of Hormuz, that's where we are absolutely aligned," Streeting told the BBC. [2]
Ongoing Conflict in Lebanon and Regional Spillover
Khamenei’s statement on Lebanon comes as war spreads into Yemen, with reports of an exchange of attacks between the Houthis and Saudi Arabia. [1] As of Sunday, Israel was still bulldozing, shelling and conducting combing operations with machineguns across large areas of southern Lebanese territory it is occupying. [1] At least 4,329 people have been killed, while 37 Israeli soldiers and four Israeli civilians have died in the latest round of violence in Lebanon. [1] Israel violated a previous ceasefire between Hezbollah and Israel more than 10,000 times, according to UN peacekeepers. [1] While the first phase is Israel’s withdrawal from three “pilot zones”, the Lebanese army said on Sunday that Israeli forces are obstructing the process, including by refusing to withdraw from designated territories. [1]
Markets React to Easing of Tensions
Oil dropped and US equity futures rose early Monday after the US refrained from striking Iran for a second straight night, easing concerns over disruptions to Middle East crude supplies following weeks of escalating conflict. [3] Brent crude fell below $90 a barrel, while Nasdaq 100 contracts advanced more than 1%. [3] The dollar edged lower against major peers, with the Australian dollar and euro leading gains as investors trimmed demand for haven assets. [3] After striking Iran for 13 days, the US has apparently held off since late Friday without explanation, raising questions about President Donald Trump’s next move. [3] Iran’s army said Sunday that Tehran had also suspended its military response. [3] The pause came as Iranian and Omani officials held talks over shipping through the Strait of Hormuz, raising hopes that the key oil transit route may avoid further disruption. [3] Oil dropped and US equity-index futures rallied as the US and Iran refrained from retaliatory strikes, easing concerns over potential disruptions to Middle East energy supplies after a recent escalation in the conflict. [4] Brent crude fell as much as 7.4% to below $90 a barrel, before paring losses as the US paused an almost two-week run of strikes against Iran. [4] Contracts for the Nasdaq 100 Index climbed 1.2% and the dollar, the haven of choice during the Middle East conflict, weakened against its Group-of-10 peers as sentiment improved at the start of the week. [4] Gold climbed 0.8% to about $4,085 an ounce and cryptocurrencies rose. [4] The pause came as Iranian and Omani officials held talks over shipping through the Strait of Hormuz, raising hopes that the key oil transit route may avoid further disruption. [4]
Background to the US-Iran Ceasefire Collapse
The pause follows nearly two weeks of daily US strikes and tit-for-tat attacks, effectively unravelling the ceasefire struck in June. [2] Iran and the US signed a memorandum of understanding in June to halt military operations and reopen the strait, as well as to reach an agreement to end the war over the following 60 days. [2] But after Iranian forces attacked tankers in the Strait of Hormuz on 13 July, the US resumed airstrikes on the country and reinstated its naval blockade on Iranian ports. [2] Iran retaliated with attacks on US military facilities and bases across the Middle East, killing four American soldiers. [2] The US strikes have since killed dozens of people, according to Iran's health ministry. [2] As the war nears its fifth month, it remains largely unpopular in the US, with a new poll from CBS/YouGov suggesting 57% of Americans are frustrated about the conflict and only 19% optimistic. [2] Thousands of people have been killed across the Middle East since the US-Israeli war with Iran began in February, official figures show, with the vast majority coming from Iran and Lebanon. [2] President Trump is set to meet Israeli Prime Minister Benjamin Netanyahu in the White House on Tuesday. [2]
What to watch next: Whether the lull in hostilities proves durable is likely to determine the direction of global markets this week, with investors also watching a trio of major central bank meetings led by the Federal Reserve on Wednesday.
