Iran and Israel said on Monday they had halted attacks on each other after an appeal from US President Donald Trump, though Tehran warned it would resume hostilities if Israel continued to hit Hezbollah in Lebanon.
The most direct confrontation between the two countries since April threatened to wreck Washington's efforts to reach an agreement with Tehran to end their more than three-month-old war.
Oil prices rose as much as 5% after the flurry of attacks, then fell when Iran's military said its first wave of strikes on Israel was over. The dollar retreated from its highest level in nearly two months.
A source briefed on the matter said Israel had also decided to halt its attacks on Iran.
Tehran had fired missiles towards Israeli territory late on Sunday, calling them retaliation for attacks on the Iranian-backed Hezbollah militia on the outskirts of Beirut.
Israel then hit Iranian air defense systems and a petrochemical plant that it said was used to produce ballistic missiles. Iran's Islamic Revolutionary Guard Corps said it retaliated with a strike aimed at a similar Israeli plant in the city of Haifa.
No deaths were reported by authorities on either side.
The latest exchanges complicated Trump's push to end a war that the US and Israel launched on February 28. A ceasefire announced on April 8 paused all-out warfare. But flare-ups in the Gulf have continued.
Trump said Israel and Iran both wanted an immediate ceasefire.
"Final negotiations on 'Peace' are proceeding, subject to ignorance or stupidity getting in its way," he wrote on social media.
US and Israeli officials said Trump and Israeli Prime Minister Benjamin Netanyahu spoke on Monday.
In an interview with Axios published on Monday, Trump said he warned Netanyahu that if the Israeli leader went back to war with Iran, he might find himself fighting alone. "I said, 'Bibi, you better be careful, or you will be on your own very soon,'" Trump said.
Israel’s Ambassador to the US Yechiel Leiter pushed back on reports that Trump pressured Netanyahu, telling Fox News’ “Special Report” that conversations between the two leaders were cooperative and accusing journalists of playing up a misleading narrative.
“They have a deep friendship that goes back some 40 years, and sometimes lovers have a spat, and sometimes the tension in the room and on the conversation can get a little heated,” Leiter said.
An Israeli military official said Israel was prepared to continue operations for "as long as it takes", while Iranian officials struck a similarly defiant tone. A military source quoted by the semi-official Tasnim news agency said Tehran was ready for a prolonged conflict and could renew strikes against U.S. interests in the region.
'Extreme suspicion'
UN Secretary-General Antonio Guterres urged all parties to exercise maximum restraint and refrain from any action that could further inflame an already volatile situation, according to spokesperson Farhan Haq.
Iranian Foreign Ministry spokesperson Esmaeil Baghaei said Tehran was exchanging messages with Washington in an atmosphere of "extreme suspicion."
Ebrahim Azizi, head of the Iranian parliament's national security committee, warned that any action against Iranian national security or Iran's allies in the region, including Yemen's Houthis, would be met with a decisive and costly response, Iranian media reported.
Yemen's Iran-aligned Houthis pledged in a statement to stop Israeli navigation in the Red Sea, and said they had also fired missiles at Israel.
The Israeli military later said it intercepted a suspicious aerial target from Yemen after hostile aircraft sirens sounded in the Eilat area.
The Houthis have so far largely stayed out of the regional war. They control territory at the mouth of the Red Sea, increasingly important as an alternative route for millions of barrels per day of Middle East oil otherwise blocked by Iran's grip on the Strait of Hormuz.
In Tehran, Iranian media reported explosions, with air defenses shooting down a drone over the capital. There were no immediate reports of casualties or major damage.
There were also signs of conditions returning to normal. Flights resumed at Tehran's Imam Khomeini Airport on Tuesday, nearly 24 hours after being suspended following Iran's missile attack on Israel, Iranian media reported.
Lebanese-Israeli talks to resume
Israel has never halted its Lebanon campaign, which has killed thousands of people, saying it should be treated separately from any US-Iranian ceasefire. Hezbollah has also continued its attacks.
Tehran has long said any peace deal with the US depends in part on an end to fighting in Lebanon, which Israel invaded in March in pursuit of Hezbollah fighters who had fired across the border.
The US ambassador to Lebanon, Michel Issa, said on Monday that Lebanese-Israeli negotiations had been scheduled to resume in Washington.
Tehran has continued to block most shipping through the Strait of Hormuz, which before the war carried a fifth of the world's crude oil and liquefied natural gas. Washington has imposed its own blockade of Iranian ports.
Trump has said any peace deal must ensure Iran cannot develop a nuclear weapon. Iran's demands include the lifting of international sanctions, the release of billions of dollars in frozen assets and recognition of its control of the strait.
