Iran: No Escalatory Spiral (Yet), But MOU Looks Distant

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Iran: No Escalatory Spiral (Yet), But MOU Looks Distant

U.S. Policy and Politics

Iran: No Escalatory Spiral (Yet), But MOU Looks Distant June 8, 2026

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1. After the first post-ceasefire exchange of direct fire between Israel and Iran this weekend, markets were reassured

this morning by Iran's declaration that it's concluding its military operation—but this is a very tentative conclusion.

After an Iranian missile barrage against Israel that was largely intercepted, followed by Israeli strikes on Iranian air

defense targets and a petrochemical facility, Iran announced that it's done for now, while threatening further escalation

if Israel's "aggression" against Hezbollah targets in Lebanon continues. But we see little reason to believe that Israel

is done striking targets in Lebanon, in part because Hezbollah keeps launching attacks into northern Israel. When

a ceasefire agreement between Israel and the Lebanese government was announced last week, we argued on our

webcast that it was basically irrelevant, because it was contingent on Hezbollah ceasing all attacks and withdrawing

from southern Lebanon. Sure enough, Hezbollah quickly rejected it. Similar dynamics remain in place here. So Iran will

hope for now that they've made their point, and that it will deter Israel to some extent—but this situation still looks

fundamentally unstable, and it may eventually require a more bare-knuckled WH effort to restrain Israel.

2. President Trump clearly wants to prevent this from spiraling out of control or derailing US-Iran negotiations,