Situation: Israel attacked the Iranian embassy in Damascus, Syria, killing several high ranking Republican Guard officers, and the whole region is now anticipating the Iranian response. Meanwhile, Israel and Hamas are making little progress in their truce talks in Cairo while Israel has withdrawn from smaller areas in Southern Gaza amidst heavy diplomatic pressure from the US.

Analysis: A whole lot going on in the Middle East – let’s take one thing at a time.

• We must expect an Iranian response that is reciprocal to the Israeli strike. That means – outside of Israel’s populated areas (since Israeli bombed the embassy in Syria), at semi-military targets. No strikes at proxy groups or civilians, but a heavy strike at Israeli positions on the border til Lebanon or similar. And expect Iran to carry out the strike themselves – not via proxies.
• This does not mean all-out war. If Iran limits the attack to the above, Israel will most likely see it as a tit-for-tat response and leave it at that for now.
• The truce talks are not really progressing, but both international and domestic pressure is mounting on Netanyahu, who remains determined to get out the last hostages and destroy Hamas. It’s still very unclear what post-war scenario the Israelis are planning for and with each week, the chance of getting rich Arab countries to help with governning Gaza in the future is diminishing as the Palestinian cause returns to the forefront of Arab politics and public sentiment. Most likely, Israel will have to take responsibility in some sort of military occupation to avoid the return of Hamas.
• I still believe that a Israel-Hamas truce will bring some temporary relief to oil prices, but the outlook for global shipping remains rather bleak.