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As hostilities between Israel and Iran flare up, the ball is now in Tehran’s court



As Israel-Iran Hostilities Flare Up, Ball In Tehran

Israel launched a retaliatory attack on Iran after the barrage of missiles and drones from Tehran last week, according to two US officials, although media from both countries appeared to downplay the severity of the incident.

An explosion was heard on Friday in Isfahan, Iran’s third largest city, Fars news agency reported. The nuclear facilities located there are safe, state television and the United Nations nuclear watchdog say.

Neither the Iranian nor the Israeli governments have confirmed that an attack by Israel took place. The Jewish state rarely comments on specific military actions related to Iran.

Flights were suspended in Isfahan and the Iranian cities of Tehran and Shiraz, as well as at airports across the country’s western borders, but those restrictions were soon eased.

The incident follows days of frantic diplomacy by American and European countries as they tried to convince Israeli Prime Minister Benjamin Netanyahu not to respond too aggressively, if at all, to Saturday evening’s Iranian attack. Their main concern is avoiding a broader war in a region already ravaged by the conflict between Israel and Hamas and which could push oil prices above $100 a barrel.

Crude oil and gold initially rose in early trading on Friday but later pared their gains as reports showed the apparent attack was far from extensive. A senior Iranian military official also said Tehran had already responded to Israeli threats and did not blame the Jewish state for the latest incident.

Isfahan is home to approximately 2 million people and several military bases and facilities. It is believed to have been one of several launch sites for the Iranian attack on Israel on Saturday evening.

The New York Times said two Israeli officials confirmed their country was behind the strike. The newspaper also reported that a military air base near Isfahan was hit.

Israel informed the US on Thursday that it plans to retaliate within the next 24 to 48 hours, two US officials told Bloomberg. They asked not to be identified discussing private conversations. Spokespeople for the National Security Council and the Pentagon declined to comment.

Brent crude climbed above $90 a barrel before trading around $87.80 as of 9 a.m. in London, up less than 1% on the day.

Gold also quickly reversed its jump. Yields on 10-year U.S. Treasury bonds – another haven for global investors in times of geopolitical tension – fell about four basis points to 4.59%.

The shekel weakened to a 2024 low this week but held steady at 3.78 per dollar on Friday. That was despite the fact that S&P Global Ratings had downgraded Israel by one level to A+ hours before the reported attack – still easily within investment-grade territory.

Israel had vowed to take revenge on Iran for its barrage of more than 300 drones and missiles, the vast majority of which were destroyed before hitting their targets. Although damage was limited and no one was killed, Israel said it would send a signal of weakness to Iran and its other enemies if it did not respond.

Iran said it was a justified response to an attack on its embassy complex in Syria on April 1, which killed several Iranian officers and blamed it on Israel.

The US, Europe and Arab states urged Netanyahu to act with restraint. The foreign ministers of Britain and Germany both traveled to Israel to see him on Wednesday.

Netanyahu faced a dilemma this week. While many of its far-right coalition members pushed for a strong response, the Israeli public was divided over whether the country should respond at all. Many said it was not worth provoking Iran and straining Israel’s ties with the US, according to a poll.

Israel has been waging the war in Gaza for more than six months and still plans to attack the city of Rafah, where several thousand Hamas fighters are reportedly based. Many in the country want the government to focus on ending the conflict against the Iran-backed militant group that launched a deadly invasion on October 7.

Ball in the Iranian Court

If attributed to Israel, the nature and scale of Friday’s attack — including any casualties — could determine whether the tit-for-tat responses between the two sides escalate or begin to be scaled back.

“The ball is now in Iran’s court,” said Ziad Daoud, chief emerging markets economist at Bloomberg Economics. “The most likely scenario is to avoid escalation through another direct attack on Israel.”

Many analysts had said that attacking Iran’s nuclear facilities would be the riskiest and most aggressive option Israel would have, with attacks on non-nuclear military facilities and cyber attacks being among the less escalatory choices.

Early indications are that this was a “symbolic attack” that will not force Iran to respond aggressively, retired Israeli general Israel Ziv told the country’s Channel 12.

Israel’s hawkish National Security Minister Itamar Ben Gvir suggested he was unhappy with his country’s apparent response.

“Weak,” he said in a one-word message on X in Hebrew.

Ben Gvir is not part of Netanyahu’s Likud party and is not in the five-member war cabinet that makes final decisions on military actions. But he is key to the survival of Netanyahu’s coalition and said after Iran’s attack that Israel must hit back hard.

The Iranian media conveyed a sense of calm in Isfahan, claiming that everything was proceeding normally. According to state television, the country’s Supreme National Security Council has decided not to convene an emergency meeting.

Iran had been preparing for a retaliation from Israel all week.

Tehran has in the past routinely accused Israel of attacks and sabotage activities targeting its nuclear and military sites, including in Isfahan, home to several key nuclear enrichment and missile facilities. Iran says its nuclear program is for peaceful purposes, but the West accuses the country of wanting to develop nuclear weapons.

On Thursday, Iran said it could reconsider its nuclear policy if Israel attacks its nuclear sites.

Iranian Foreign Minister Hossein Amirabdollahian also warned Israel against lashing out after the weekend attack.

“In the event that the Israeli regime again embarks on adventure and takes action against Iran’s interests, our next response will be immediate and at maximum levels,” he told CNN.