The United States and Iran have continued exchanging military attacks in the Middle East, according to recent reports. The conflict, part of the ongoing 2026 Iran War, began with US and Israeli airstrikes on Iran in late February. The US military has targeted Iranian military infrastructure, while Tehran has retaliated against US assets in the region. This escalation indicates a persistent military conflict, with no stable ceasefire in sight. The strategic Strait of Hormuz remains a critical area amid these tensions, impacting regional security and international shipping routes.

Key Takeaways

• Recent US-Iran attacks suggest continued military escalation, consistent with scenarios undermining a US-Iran deal in 2026.
• Pricing in markets reflects a decreased likelihood of Iran Reconstruction Funding being included in such a deal.
• Market participants appear to interpret these developments as supportive of scenarios where diplomatic resolutions remain elusive.

What to Watch

Observers should monitor any diplomatic efforts by key actors such as the US and Iranian negotiators, as well as mediators from Qatar and Pakistan. Developments such as new military actions by Israel or announcements of resumed operations in Lebanon could further influence market perceptions. Additionally, any shifts in uranium enrichment levels or changes in US policy could impact the probability of a US-Iran deal materializing by the end of 2026.

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