What has Happened:

• In our last SITREP, we addressed the April 1^st Israeli strike on the Iranian diplomatic facility in Damascus that killed Mohammad Reza Zahedi, a senior commander of the Quds Force in the Iranian Revolutionary Guard Corps (IRGC).
• At the funeral on Friday, the IRGC commander General Hossein Salami said that Israel “cannot escape the consequences” of assassinating Iranian military officers.
• While the U.S. has denied any involvement in (or even prior knowledge of) the Damascus strike, it has picked up intelligence that Iran is planning a retaliatory attack in the next week that could include drones/cruise missiles.
• The specific timing/target is unknown, but there is a chance that a “proportional response” could be an attack on an Israeli diplomatic facility.
• A direct Iranian strike on Israel is unlikely, but Israel has cancelled leave for combat units, drafted reservists to augment its air defenses, and scrambled GPS in parts of Israel.
• The U.S. has indicated that Pentagon officials are also concerned that there is an increased risk to U.S. troops in the region.
• Since Iran is not seeking a broader war with Israel or the U.S. at this time, any response would have to be carefully considered to avoid a larger conflict.

Why it Matters:

“Iran’s rhetoric to hold the U.S. accountable for Israel’s attack on the Iranian consulate in Syria is a typical response to past attacks. Israel’s attacks are pushing Iran to respond and widen the conflict while the U.S. seeks to limit the conflict to Gaza. Iran has responded in the past by attacking U.S. forces in Syria and Iraq that they view as vulnerable to attacks by their militias. The Iranians feel that the information campaign from Gaza is having a negative impact on the relations between President Biden and Prime Minister Netanyahu. Continued military support is being questioned by Secretary Blinken if the IDF does not accept the U.S. recommendations to change its plan for entering Rafah. Iran has been hesitant to restart militia attacks on U.S. forces after the air strikes against the militias and the IRGC’s Quds Force following the killing of three U.S. soldiers in Jordan. Hitting U.S. forces in Iraq and Syria could be a strategy by Iran to increase the divide between the U.S. and Israel. An escalation by Iran could be a strategic win if the U.S. begins to limit the supply of weapons to Israel. This is a delicate situation since Israel, Iran, and the U.S. do not want to expand this into a regional conflict.” – General Robert Walsh

“This tension is definitely impacting oil prices, and that pressure on oil is translating into higher bond yields at the longer end, as the inflation and potential military spending on escalation are outweighing any ‘flight to safety’ pressure that we would normally see (which has been our base case during this war, see Hedging Geopolitical Risk).” – Peter Tchir

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