TheChek News Flow

Iran Rebuffs Calls for Restraint in Its Response to Killing of Hamas Leader

U.S. and Arab diplomats seek to head off spiral of violence over Ismail Haniyeh’s death in Tehran as Iran probes attack

Iran rejected U.S. and Arab efforts to temper its response to the killing in Tehran of Hamas’s top political leader, as authorities were investigating the security breaches that led to the attack.

Iranian prosecutors said Saturday that they had opened a formal investigation into the killing of Ismail Haniyeh, which came hours after an Israeli strike killed a senior Hezbollah commander in Beirut. The two attacks, following a rocket strike on a soccer field in the Israeli-controlled Golan Heights, escalated a recent cycle of violence and threatened to push the region to the brink of war.

Iranian leaders have vowed to retaliate. On Saturday, Iran told Arab diplomats it didn’t care if the response triggered a war, according to people familiar with the conversations.

The U.S. asked European and other partner governments to convey a message to Iran not to escalate, warning any significant strike would draw a response and signaling that efforts by Iran’s new President Masoud Pezeshkian to improve engagement with the West would have a better chance if Iran shows restraint, according to people involved in the discussions. The U.S. also said, as a part of its message, that it was pressing Israel to de-escalate too.

Jordan said on Sunday that it had sent its foreign minister to Tehran, and the Lebanese foreign minister was also headed to Cairo to discuss ways to diffuse tensions.

Israel said it was prepared to defend against and respond to any retaliatory strike.

“Israel is now in a multifront war against the Iranian axis of evil,” Israeli Prime Minister Benjamin Netanyahu said on Sunday. “We are ready for any scenario—either defensive or offensive. I repeat to our enemies: We will respond and exact a heavy price for any act of aggression against us, from any arena.”

The killing of Haniyeh in Tehran, who was there to attend the inauguration of Iran’s new president was an embarrassing security failure for Iran. He was killed by a bomb while he was staying in an Islamic Revolutionary Guard Corps guesthouse, The Wall Street Journal has reported.

Iran and Hamas, which blame Israel for the attack, disputed that a bomb killed Haniyeh, saying he was struck by a missile. Israel hasn’t publicly commented on the killing.

Sadeq Rahimi, the deputy chief of Iran’s judiciary, said on Saturday that the country’s public prosecutor opened an investigation into Haniyeh’s death and issued an order to identify and arrest anyone who was either negligent or knowingly worked with Israel in the killing, according to the local Fars news agency, which is affiliated with Iran’s Islamic Revolutionary Guard Corps. Some security officials have already been questioned, according to people familiar with the matter.

“Whether Israel has used infiltratory elements, human agents and spies, or it has committed this crime directly are under investigation,” said Rahimi, according to Mehr news, also close to the IRGC.

Politicians in Tehran have said the attack exposed intelligence failures by Iran’s security agencies. “There are gaps and contaminations in the security-information system of the country,” said Ahmad Bakhshaish Ardestani, a member of the foreign-affairs and national-security commission in Iran’s parliament, to Iran’s Didban news site.

Israel has put its military on high alert, while U.S. officials have worked to get military assets and regional partners ready to stop an attack that some fear could be broader and more complex than an Iranian assault in April.

“We are preparing for every possibility, just as we did in advance of April 13 when Iran attacked Israel and the United States and a coalition of our partners and allies worked with Israel to defeat that attack,” U.S. Deputy National Security Adviser Jon Finer told ABC News on Sunday.

In that attack, Iran fired more than 300 drones and missiles at Israel, but only after telegraphing its response to diplomats ahead of time and giving Israel and the U.S. a chance to prepare. Ultimately, most of the projectiles were shot down before reaching Israel. But this time, Iran has refused to provide detailed warnings that would help mitigate the impact of any strike.

Separately on Sunday, Hamas claimed responsibility for a stabbing attack in the Israeli city of Holon. The attacker killed two elderly people and injured two others, according to Magen David Adom, emergency rescue operators, and Wolfson Medical Center.

Fears grow of all-out war in region after assassinations linked to Israel

Western governments have stepped up calls for their citizens to leave Lebanon while ​​commercial flights are still available, as an anxious region braced for the possibility of a full-blown regional war after twin assassinations in Beirut and Tehran. 

France urged its citizens to leave the country as soon as possible owing to the “very volatile ​​security context”, following similar calls by the UK, US and Jordan on Saturday, which cited the escalating tensions between Israel, Iran and the Hizbollah militant group.

“We encourage those wishing to leave Lebanon to book any available ticket, even if that flight does not depart immediately or does not follow the itinerary of their choice,” the US embassy in Lebanon said in an email to its citizens.

White House deputy national security adviser Jonathan Finer declined to comment on whether this advice meant the US believed Israel would strike inside the country soon. “We are preparing for whatever may come, but this is no prediction about future events,” Finer told CBS News.

“Leave now,” UK foreign secretary David Lammy told Britons in Lebanon. “Tensions are high, and the situation could deteriorate rapidly . . . my message to British nationals there is clear.”

Sweden on Saturday shut its embassy in Beirut, calling on all Swedes to leave the country as soon as possible.

Several airlines have suspended, rescheduled or cancelled flights to and from Beirut this week, including Air France-KLM Group, Kuwait Airlines, Lufthansa Group, Aegean, Emirates and Qatar Airways. Some airlines suspended services to Israel.

Israel has publicly claimed responsibility for the assassination of senior Hizbollah commander Fuad Shukr in Beirut last week, but it has neither confirmed nor denied carrying out the killing of Hamas political leader Ismail Haniyeh in Tehran on Wednesday. 

Iran said Haniyeh was killed by a short-range projectile that was fired into the official residence where he was staying in Tehran, and vowed to punish Israel.

The country’s Revolutionary Guards said on Saturday that the assassination was “orchestrated and executed” by Israel and accused the “criminal” US of complicity in the strike.

Hassan Nasrallah, leader of Lebanon-based Hizbollah, has also vowed revenge against Israel. 

Israeli officials on Sunday attempted to calm a nervy public awaiting an imminent retaliation by Iran and its proxy forces.

“We are all enduring very tense and complex times. Our enemies, part of an axis of evil, have declared their intent to attack us soon with great force,” Israeli President Isaac Herzog said. “I do not underestimate the severity of this threat . . .[But] I unequivocally declare: the state of Israel is prepared to confront this threat.”

Israeli Prime Minister Benjamin Netanyahu, in public remarks, warned that “anyone who harms us will pay a heavy price”.

Israel and the Lebanese militant group have traded cross-border fire since Hamas’s October 7 attack. But the simmering conflict has not spilled over into a full-blown conflagration, thanks partly to US-led diplomatic efforts and partly to hesitation by both arch-foes to trigger a conflict that could devastate both countries.

Diplomacy has intensified over the past week to try to avert a regional war, while the US has deployed additional forces to the region.

Finer said the move was “entirely focused on defending Israel against potential threats it may face, and out of our desire to both deter those threats, defend against them and ultimately de-escalate this situation and avoid it sliding into regional war”.

As regional states sought to reduce tensions, Jordan’s foreign minister Ayman Safadi made a rare visit to Iran on Sunday to hold talks with his Iranian counterpart, Ali Bagheri Kani. 

Jordan was the only Arab state to publicly acknowledge that it helped shoot down Iranian projectiles that flew over its airspace when Tehran launched a missile and drone barrage at Israel in April. 

The foreign ministers of Saudi Arabia, Qatar and Oman have all held calls with Bagheri Kani in recent days. 

At the same time, Hizbollah affiliates have lashed out at the US envoy who has been working to broker a deal between Hizbollah and Israel to end their clashes, accusing Washington of bearing responsibility for Shukr’s assassination.

The Lebanese militant group was not in a “listening mood”, said two people familiar with the talks, saying it would respond however and whenever it wanted.  

Many Lebanese who have the option have left the capital for areas deemed safer. But those that stayed filled concert venues, restaurants and bars this weekend.

“I fought with myself for hours about whether to go out or stay home but I decided a glass of wine or three would help calm my nerves,” said 42-year-old Selim Georges in a popular Beirut restaurant on Sunday. 

The calls by western governments to leave Lebanon added to fears as thousands of Lebanese expats who are home for the summer debated whether to stay or go. 

France estimates that about 23,000 of its citizens live in Lebanon, with thousands more visiting, while the UK estimates about 16,000 of its citizens live there.

Sunday also marked the fourth anniversary of the huge port explosion that ripped through Beirut and killed more than 200 people, caused by hundreds of tonnes of improperly stored ammonium nitrate.

Dozens gathered in downtown Beirut to protest against the lack of accountability for the devastating blast, with some blaming Hizbollah for obstructing justice.

Week Ahead for FX, Bonds: U.S. ISM Services Data, Australian Rate Decision in Focus

Below are the most important global events likely to affect FX and bond markets in the coming week starting Aug. 5.

U.S. ISM data on services sector activity and an interest-rate decision in Australia are likely to prove the highlight of an otherwise quieter week. Rate decisions are also due in India and Mexico, while Japanese data will be watched closely after the Bank of Japan’s recent interest-rate hike.

Investors will be keeping a close eye on U.S. data after recent evidence suggesting the economy could be slowing, adding to expectations that interest rates will soon be cut.

Focus will center on ISM data on services sector activity in July, due on Monday, to see whether it replicates unexpected weakness in the equivalent survey on manufacturing.

“Investors will keep an eye on employment and prices components [in ISM services data] following a big miss for the manufacturing gauge,” Deutsche Bank economists said in a note.

The U.S. Federal Reserve left interest rates unchanged at its July 31 meeting but suggested that it could reduce rates at its September meeting. Following weak U.S. jobs data for July, money markets are pricing in a minimum of three 25 basis point interest-rate cuts by year-end, with a risk that the Fed may opt for a bigger 50 basis-point reduction, according to Refinitiv.

The rest of the week is relatively quiet in terms of data releases, with U.S. trade data for June due on Tuesday and weekly jobless claims on Thursday.

Canadian monthly jobs data for July due on Friday will be closely watched after recent stronger-than-expected second-quarter gross domestic product data cast some doubt over whether the Bank of Canada will cut interest rates again in September.

“It is activity in the second half of the year where we see scope for more substantial downside surprises relative to the Bank of Canada’s current forecasts,” Citi analysts said in a note.

TD Securities’ analysts said they are leaning toward a hold on rates in September but note that this remains a very tight call.

Canadian trade data for June are due on Tuesday and the latest Ivey PMI survey on Wednesday.

Mexico’s central bank announces an interest-rate decision on Thursday, with investors uncertain over whether it will cut or hold rates.

“The next central bank meeting is a close call. But on balance we think softness in the economy, alongside the fall in core inflation in the first half of July and the prospect of a rate cut in the U.S. in September, will prompt Banxico to resume its easing cycle,” Capital Economics emerging markets economist Kimberley Sperrfechter said in a note.

Recent data suggest that the eurozone’s economic recovery is starting to falter but at the same time inflation remains elevated, potentially complicating the European Central Bank’s task.

A majority of investors expect the central bank will probably cut interest rates next month, but they will be looking to see whether coming data support that view or not.

Final purchasing managers’ surveys on services-sector activity during July are due on Monday, alongside eurozone producer price inflation figures for June. Eurozone retail sales data for June on Tuesday will give an indication of how the region’s consumers are holding up.

German industrial production and trade figures are due on Wednesday, followed by French unemployment and German final inflation data on Friday.

Government-bond issuance slows down significantly in August, in line with the seasonal pattern. Germany will conduct two auctions, selling the October 2029-dated federal note, or Bobl, on Tuesday and 2038- and 2041-dated bunds on Wednesday. Also on Tuesday, Austria will tap 2034- and 2040-dated bonds.

The Treasury will auction $58 billion in new three-year notes on Tuesday, $42 billion in 10-year notes on Wednesday and $25 billion in 30-year bonds on Thursday.

The Bank of England announced its first interest-rate cut in four years at its Aug. 1 meeting, although it resulted from a very tight 5-4 vote, suggesting that policymakers could be cautious about cutting interest rates too fast from here.

Investors will be looking to see whether data suggest the U.K. economy is continuing to hold up well and on whether there are any signs of services inflation starting to drop.

The final purchasing managers’ survey on U.K. services-sector activity during July is due on Monday, followed by the British Retail Consortium’s retail sales monitor for July on Tuesday. Data later in the week will give an indication on the health of the housing market, with the RICS July house price balance due on Thursday.

The DMO will sell October 2043 gilts on Tuesday and July 2029 gilts on Wednesday.

Norwegian inflation data for July are due on Friday. These are unlikely to alter expectations that Norway’s central bank, or Norges Bank, is unlikely to cut interest rates before December.

Denmark and Norway are scheduled to hold bond auctions on Wednesday.

The Reserve Bank of Australia appears set to keep its official cash rate on hold at 4.35% at its policy meeting that concludes Tuesday, but remain vigilant about inflation. Core inflation is still well above target and income tax cuts delivered to workers from July 1 pose upside risk.

Speculation had been building that RBA Gov. Michele Bullock might have to announce a deeply unpopular interest increase this month, but most economists think second-quarter inflation data failed to produce the smoking gun needed to tighten the policy screws further.

In New Zealand, second-quarter job market data on Wednesday are expected to show that unemployment jumped from the prior quarter, amplifying calls for the Reserve Bank of New Zealand to quickly shift the policy needle toward interest-rate cuts, and potentially deliver a string of reductions over the next year to revive the country’s moribund economy.

Japan reports a string of data during the week, including household spending and balance of payments data for July. Minutes from the Bank of Japan’s June meeting due Monday, plus a summary of opinions from its July meeting on Thursday, are also due.

Traders will keep a watchful eye on any policy comments from officials after Japanese stocks slumped and the yen strengthened in the wake of the BOJ’s rate increase. Analysts have been split on whether the rate increase has come too soon, given signs of continued weakness in the economy. That puts the week’s data releases in particular focus.

The BOJ is scheduled to buy Y350 billion of 1- to 3-year Japanese government bonds, Y375 billion of 3- to 5-year sovereign notes and Y150 billion of 10- to 25-year government securities on Wednesday. The Ministry of Finance is slated to auction Y2.6 trillion of 10-year JGBs on Tuesday and Y900 billion of 30-year JGBs on Thursday.

China is set to release trade and inflation data, along with another indicator of the health of the services sector.

ING expects to see some tentative signs of strength in the figures, which would be welcome after a continued run of down beat data.

July’s data is likely to show that exports remained in high single-digit or low double-digit growth amid a supportive base effect, and a modest recovery in import growth, the economists said. Inflation may have trended a touch higher as well, ING added.

PPI deflation may have weakened slightly in July, Barclays economists expect, given declines in the PMIs for input and output prices despite low base effects.

Services PMI will also be watched on Monday after a surprise slip in the manufacturing gauge.

Indonesia reports second-quarter economic growth data on Monday, which is expected to show still-robust momentum in Southeast Asia’s largest economy.

Economists polled by The Wall Street Journal project growth at 5.09% on year in the April-June period, easing a tad from the first quarter’s 5.11%.

Recent data indicate that domestic demand has slowed as the boost from the election earlier this year faded, ANZ economists Dhiraj Nim and Sanjay Mathur said.

Exports might also not contribute as much to economic growth moving forward, as the outlook for external demand seems challenging as global growth slows and commodity prices weaken, they said. Domestic demand could remain the primary growth driver for Indonesia in 2024, the economists said, tipping full-year growth at around 5%.

India’s central bank is likely to keep rates on hold at its rate meeting on Thursday, with policymakers seemingly under little pressure to either cut or hike.

The Reserve Bank of India has a lot to digest since its last meeting in June: sticky food price pressures, a new government budget pointing to continued fiscal consolidation, and the Federal Reserve starting to hint at a September rate cut, Barclays economists Shreya Sodhani and Amruta Ghare said.

While broadly steady domestic growth indicators offer a source of comfort for the Indian central bank, the RBI also seems increasingly cautious about food inflation, which has been preventing durable disinflation in the headline rate, the economists said. Barclays only sees a rate cut window opening in December, with risks that the start of easing may be delayed into 2025.

ING economists also think RBI will hold fire but don’t fully dismiss the chance for a cut.

“As long as the dollar remains under weakening pressure and the inflation data plays out the way we think it will, then an October rate cut is definitely within reach and we cannot absolutely rule out a cut on 8 August,” they said.

Data on Tuesday and Thursday will show the Philippines’s progress on the inflationary front and how its economy has fared in the second quarter.

Both releases will be looked at for hints as to when the central bank might start cutting rates.

ING economists think more time might be needed to see how inflation develops, given the potential impact of rice tariff cuts and typhoons.

“That probably puts a lid on Bankgo Sentral ng Pilipinas’ ambitions to front-run the Federal Reserve with rate cuts as soon as this month, though conditions are becoming more favorable, and BSP could well still see a window for easing in the fourth quarter of 2024,” they said.

ING expects economic growth to clock in to 7% on year for the second quarter, though this will be mainly a base-effect driven result.

Any references to days are in local times.