Tensions high as Iran threatens retaliation against US strikes

• US and Iranian forces clashed near the Strait of Hormuz despite ongoing peace talks for a ceasefire extension, highlighting regional tensions. Both sides claimed defensive actions.
• Ongoing US-Iran negotiations face major obstacles including unfreezing funds, Strait of Hormuz passage, Iran's uranium stocks, and Lebanon ceasefire terms.
• President Trump balances pressure from US hawks for more strikes against public war fatigue and rising global energy prices. Arab states urge diplomacy.

WASHINGTON/DOHA – Tensions were high between Iran and the United States on May 26 as Tehran warned of retaliation following US strikes overnight in southern Iran, threatening already fragile diplomatic efforts.

Iran’s Foreign Ministry accused the US of violating its fragile ceasefire agreement with Tehran, suggesting in a statement that the latest attacks also undermined ongoing efforts to resolve the war diplomatically.

“Undoubtedly, the Islamic Republic of Iran will not leave any act of mischief unanswered,” the ministry said in a statement, reiterating earlier threats by other Iranian officials to respond to the strikes with force.

The renewed hostilities have deepened uncertainty over prospects for a peace agreement, with US President Donald Trump and his administration sending mixed signals about ongoing negotiations.

US Secretary of State Marco Rubio said on May 26 that talks were continuing, and that a deal to end the war could still take “a few days”.

Iranian leaders, meanwhile, sought to project resilience, with Iran’s Supreme Leader Mojtaba Khamenei declaring that “the hands of time do not turn backward” and warning that countries in the region would no longer act as shields for American bases.

The US military said it conducted self-defence strikes in southern Iran, targeting missile-launch sites and boats attempting to lay mines, while the Islamic Revolutionary Guard Corps (IGRC) said it fired at an F-35 fighter jet and several drones after they entered Iranian airspace.

The IRGC claimed it shot down an unmanned MQ-9 Reaper drone and forced the other aircraft to flee.

Several Iranian personnel were killed in the attacks on vessels near Larak island in the Strait of Hormuz, Iran’s state-run Nour News reported, without providing further details. Israel’s military said it was not part of the US operation.

Mr Rubio said Mr Trump would either agree to a good deal or make no deal at all.

The President is under pressure from Iran hawks in the US, including Republican Senator Lindsey Graham. They are concerned the emerging deal, which may see the US unfreeze billions of dollars of Iranian funds and lift a blockade of Iranian ports, concedes too much, and they want more strikes to further weaken Iran’s military.

Mr Trump has to balance those pressures with the increasing unpopularity among Americans of the war, which began with a US-Israeli bombardment of Iran in late February. The conflict and Iran’s effective closure of Hormuz have caused energy prices to soar and are pushing up inflation globally.

Brent crude rose 3.8 per cent to just below US$100 a barrel on May 26, though it is still down this week on signs an interim deal is closer.

Arab states, including Saudi Arabia, the United Arab Emirates and Qatar, have urged Mr Trump to continue with diplomacy.

They fear a return to hostilities would cause Iran to revert to firing drones and missiles on their countries, as it did before the April truce, causing tens of billions of dollars of damage and killing scores of people.

On May 25, Mr Trump, in a Truth Social post, urged Saudi Arabia, Qatar and other countries to join the Abraham Accords and recognise Israel. That appears unlikely unless Israel takes steps towards allowing a Palestinian state, which its government has ruled out.

Unresolved issues

Beyond the frozen funds, other obstacles to a US-Iran pact include whether Tehran will allow ships free passage through the Strait of Hormuz. The US, Arab states and Europe say it must, but Iranian officials say they want to charge fees for navigation services.

Mr Trump also wants Iran to commit to handing over or destroying its stocks of highly enriched uranium, which the US fears could be used to build an atomic bomb.

Iran has publicly rejected that, though it has also signalled it may send the stocks to a third country, with Russia and China being the most likely candidates.

Lebanon, where Israel is fighting Iran-backed Hezbollah militants, is another sticking point. Iran insists on a ceasefire there too, while Israel has said it must be allowed freedom of action.

Late on May 25, Prime Minister Benjamin Netanyahu said Israel will intensify strikes on Lebanon, where its invasion has killed thousands of people and displaced more than a million.

An Iranian delegation headed by Parliament Speaker Mohammad Bagher Ghalibaf travelled to Doha in Qatar for consultations with senior Qatari officials on May 25. Iranian central bank governor Abdolnaser Hemmati was part of the group and was set to discuss the release of frozen Iranian funds, the Fars news agency reported.

Even if the sides can reach an interim agreement, which will probably see the ceasefire extended by around two months, they would then need to go into complicated negotiations over Iran’s nuclear programme.

The war could still restart if those were to break down. BLOOMBERG