Israel and Hizbullah agree ceasefire; Oil price falls on hopes agreement will bolster US-Iran deal

Israel and Hizbullah agreed to a new truce on Friday after fighting between the foes threatened to derail Donald Trump’s push to reopen the Strait of Hormuz and end the US’s more than 100-day war with Iran.

The latest clashes between Israeli forces and the Iran-backed Lebanese militant movement had caused Tehran to postpone the start of nuclear talks to US officials scheduled to take place in Switzerland.

Those negotiations are integral to implementing a memorandum of understanding (MoU) the US and Iran signed this week, under which Iran has agreed to reopen the Strait of Hormuz.

The latest ceasefire between Israel and Hizbullah was brokered late on Friday after a flurry of diplomacy between the US, Qatar and Iran.

But the clashes underlined the fragility of the MoU, which is intended to extend an April 8th US-Iran ceasefire by 60 days and lay the foundations for a permanent end to the war.

The MoU declared an immediate and permanent end to military operations on all fronts, including in Lebanon. But Israel and Hizbullah have continued to exchange hostilities in what has become a big stumbling block to the deal’s implementation.

Israeli air strikes hit more than 20 villages across southern Lebanon, killing 47 people and wounding 97, according to the Lebanese health ministry. A Hizbullah drone strike on an Israeli tank in southern Lebanon killed four Israeli soldiers shortly after midnight on Friday, and five more were wounded in a separate drone attack.

Before the Israeli-Hizbullah truce was brokered, Iran fired warning shots at ships in the Strait of Hormuz, according to two people familiar with the situation, underscoring how it had linked its deal with the US to the conflict in Lebanon.

It also issued a radio broadcast to ships that said the waterway, through which a fifth of the world’s oil and gas travelled before the war, “will remain closed” until Israel withdrew from Lebanon and other terms of the agreement were met.

After the Israeli-Hizbullah truce, oil prices turned lower, with Brent crude down 0.8 per cent at $79.25 a barrel.

Israeli Prime Minister Benjamin Netanyahu has insisted Israel will continue to defend itself and will stay in what it describes as a security zone in Lebanon for as long as necessary to protect communities in its northern border region.

Both Trump and US Vice-president JD Vance, who had been expected to attend the nuclear talks in Switzerland, have publicly vented their frustration with Netanyahu and members of his far-right coalition in recent days.

In an unusually blunt outburst against the Israeli government, Vance on Thursday warned that Trump was “the only head of state in the entire world who is sympathetic to the nation of Israel at this moment in time”.

“You’ve seen people within [Netanyahu’s] cabinet who have come out and attacked the deal, and in some ways very personally attacked the president of the United States,” Vance said.

Within hours of the MoU being electronically signed, Trump ordered the US Navy to lift its blockade on Iranian ports in a sign of his desire to move the deal forward and get the strait opened.

Restoring transit through the critical waterway has become a priority for Trump as he seeks to ease the global energy crisis ahead of November’s midterms.

Iran has agreed to allow shipping to pass through the strait toll-free for the duration of the 60-day ceasefire. But it will discuss the future administration of the chokepoint with Oman and other Gulf states as part of the next phase of the deal.

In a document circulated among shipping industry executives and seen by the FT, Iran’s the Gulf Strait Authority said that “all vessels must hold a valid insurance policy approved by the PGSA”.

While this would be provided “free of charge” for the moment, the PGSA – a government agency created in May – said it “reserves the right to introduce insurance fees in the future, which will be determined by the relevant insurer”.