Israel Defense Forces and Hezbollah, the Iranian-backed militia in Lebanon, exchanged some of the heaviest fighting in months on Sunday as fears mount that a direct Iranian retaliatory strike on Israel could spark an all-out regional war. 

Israel’s military launched preemptive strikes in southern Lebanon against Hezbollah’s high-value targets after allegedly detecting movement on the ground that militia forces were preparing to launch a barrage of missiles, rockets, and kamikaze drones into Israel. 

Hezbollah announced in a statement that Israel’s claim that it launched a pre-emptive attack against Hezbollah’s forces to thwart a missile attack was “baseless,” further saying, “These are empty claims.” The militia said approximately 320 rockets and drone waves were launched into Israel. The IDF said the militia launched about 200 rockets. Hezbollah called the operation a “complete success.” 

🚨🇮🇱 IRON DOME INTERCEPTIONS UNDERWAY IN WESTERN GALILEE

Numerous Iron Dome interceptions have been reported over the Western Galilee.

Footage shows the Iron Dome system engaging rockets fired by Hezbollah from Lebanon.

Source: Times of Israel https://t.co/DlVE96ibPD pic.twitter.com/UJ8oyGvpPy

— Mario Nawfal (@MarioNawfal) August 25, 2024

Nadav Shoshani, the Israeli military spokesman, said hundreds of rockets and drones were fired by Hezbollah forces into residential areas of northern Israel, noting, “This is part of a larger attack that was planned, and we were able to thwart a big part of it this morning.” 

Meanwhile, the preemptive strikes by the IDF involved over 100 fighter jets that bombarded Hezbollah rocket launcher barrels across southern Lebanon. The IDF said over 40 high-value targets were destroyed.

🛑BREAKING: In a self-defense act to remove Hezbollah’s threat, the IDF is striking targets in south Lebanon, from which the Iranian-backed Lebanese terror organization was planning to launch their attacks on Israeli civilians.

Hezbollah rocket and drone attacks are targeting… pic.twitter.com/BtuUAqtgsv

— Israel ישראל (@Israel) August 25, 2024

𝐈𝐃𝐅: 𝐀𝐩𝐩𝐫𝐨𝐱𝐢𝐦𝐚𝐭𝐞𝐥𝐲 𝟏𝟎𝟎 𝐈𝐀𝐅 𝐟𝐢𝐠𝐡𝐭𝐞𝐫 𝐣𝐞𝐭𝐬 𝐬𝐭𝐫𝐮𝐜𝐤 𝐚𝐧𝐝 𝐝𝐞𝐬𝐭𝐫𝐨𝐲𝐞𝐝 𝐭𝐡𝐨𝐮𝐬𝐚𝐧𝐝𝐬 𝐨𝐟 𝐇𝐞𝐳𝐛𝐨𝐥𝐥𝐚𝐡 𝐫𝐨𝐜𝐤𝐞𝐭 𝐥𝐚𝐮𝐧𝐜𝐡𝐞𝐫 𝐛𝐚𝐫𝐫𝐞𝐥𝐬, 𝐚𝐢𝐦𝐞𝐝 𝐟𝐨𝐫 𝐢𝐦𝐦𝐞𝐝𝐢𝐚𝐭𝐞 𝐟𝐢𝐫𝐞 𝐭𝐨𝐰𝐚𝐫𝐝 𝐧𝐨𝐫𝐭𝐡𝐞𝐫𝐧… pic.twitter.com/kGtVJXgQVk

— Israel ישראל (@Israel) August 25, 2024

Still needs to be confirmed. 

🚨🇱🇧🇮🇱ISRAEL WARSHIP HIT BY HEZBOLLAH?!

A scene has surfaced showing the exact moment an Israeli Navy’s Dvora-class warship was struck by Hezbollah, resulting in the death of a soldier on board.

The attack occurred during initial response operations following the assassination… pic.twitter.com/OaxVSoVbFa

— Mario Nawfal (@MarioNawfal) August 25, 2024

The cross-border fighting between Israel and Hezbollah was some of the most severe in months, resulting in at least three fatalities in Lebanon, according to the country’s health ministry. However, within hours after the fight began, both sides appeared to de-escalate, with Hezbollah declaring its military operations “finished for the day.” In a further indication that the situation was stabilizing, Israel, which shuttered Ben-Gurion International Airport near Tel Aviv earlier, reopened the airport later in the day.

Furthermore, Israel’s military lifted most of the emergency orders it imposed nationwide during the pre-emptive strike mission and resulting missile and drone strikes into Israel by militia forces.

8,000 + rockets.

Every rocket has an address.

What would you do if that address was yours? pic.twitter.com/gN5WZVpWoV

— Israel ישראל (@Israel) August 25, 2024

The UN missions in Lebanon pleaded to “refrain from further escalatory action” and urged “a return to the cessation of hostilities” between both sides due to the risks of regional conflict. 

Hezbollah is heavily armed with missiles and drones. CNN provides a threat map of the militia’s missile ranges. 

The IDF outnumbers Hezbollah forces by a significant margin. 

Before Sunday, regional conflict risks across the Middle East have been elevated following Israel’s assassinations of senior leaders of Hamas and Hezbollah, with Tehran warning about retaliatory strikes.  

Meanwhile, an Israeli delegation will head to Egypt on Sunday to advance cease-fire talks and hostage deals in Gaza, according to NYTimes, citing two Israeli officials who spoke on the condition of anonymity. Senior officials from Qatar, the US, and Egypt were brokering the talks. Hamas officials arrived in Cairo on Saturday night, though it wasn’t entirely clear if they would participate in the direct negotiations. 

In markets last week, Brent crude rebounded to $79/bbl after sliding to $76/bbl.

Here is Goldman’s Lindsay Matcham’s take on crude markets last week:

Crude; bullish factors include positioning which has dropped to an all-time low, global oil commercial stocks have pivoted to modest draws and brent call options implied vol skew jumped to its highest level since April as Iran reiterated its intentions to retaliate against Israel and amid Ukraine’s incursion into Western Russia.

GS shows Brent’s net managed money positioning plunged to its all-time low in data going back to 2011. 

Traders are split between geopolitical concerns and a slowdown in China and the US, and there is no clear direction in Brent price action.