US and Iran Extend Ceasefire as Diplomacy Eases Escalation Tensions

By Omar Tamo and Eltaf Najafizada (Bloomberg) —

The US and Iran held off on attacks for a third straight night, helping lift global stock and bond markets and push down oil prices.

US President Donald Trump, who last week threatened to intensify strikes against the Islamic Republic, is instead giving diplomacy "some space," Mike Waltz, Washington's ambassador to the United Nations, said on Sunday.

Talks are "ongoing" between the sides on a technical basis and at the leadership level, he added, without giving details. Iran's Foreign Ministry spokesman, Esmail Baghaei, said Monday that while "it's possible that mediators share messages from the US side about current developments," no negotiations are currently taking place.

The New York Times reported that Trump and his advisers decided to hold off on escalation plans in part because of diminishing stockpiles of air defenses such as Patriot interceptors. Waltz, speaking to NBC, said American forces had all the weaponry they needed.

Trump has consistently said "he prefers a diplomatic solution, but he continues to retain all options if Iran continues terrorist activities in the Strait of Hormuz or against allies," a White House spokesman said in a statement.

Iran's army said it halted its retaliation against US bases and troops in the region as a result of Trump's decision to hold off on strikes. The Islamic Republic had been attacking the likes of Kuwait, Bahrain and Jordan on a near-daily basis in the two weeks before the US's pause on Friday.

Brent crude fell more than 6% in early trading on Monday to under $91 a barrel, after climbing 10% last week on the worsening fighting. US Treasury yields also dipped, while S&P 500 futures rose 1%.

Axios reported Sunday that Admiral Brad Cooper, the top US commander overseeing the Middle East, recommended stopping strikes because they had reached the limit of their effectiveness, citing sources in the region.

Israeli Prime Minister Benjamin Netanyahu is scheduled to meet Trump in Washington on Tuesday. He said he plans to press the US leader on keeping a "constant watch" on Iran's nuclear program, one of many issues now in limbo following the breakdown of an interim peace deal agreed last month.

Tensions between the warring sides remain high and Iran has said there's no change to the status of the Strait of Hormuz, meaning it's likely to continue targeting commercial ships that don't receive its permission before transiting. Traffic through the vital waterway — through which one fifth of the world's oil and liquefied natural gas supplies flowed before the conflict — remains negligible.

On Monday, Iranian state TV said Tehran forced six ships going through the southern corridor near the Omani coast to turn around. One of the ships suffered an "incident," according to the reporting, which cited an Iranian official with knowledge of the matter.

"We have never allowed, and will never allow, the United States to determine the timing of the war," an Iranian foreign ministry spokesman said separately on Monday. "We will defend ourselves whenever our interests require it, and we will certainly use diplomatic tools whenever we feel it is appropriate."

The US, meanwhile, is maintaining its blockade on Iran's ports.

The lull in fighting came as Iranian and Omani officials met over the weekend in a fresh attempt to resolve shipping through Hormuz. Iran said the talks were constructive and some progress was made, though gave no details, adding consultations were continuing.

In recent weeks, Iran tried to persuade Oman to establish a joint management system of the strait that may have effectively tolled ships. It's unclear if the two are still discussing that, though Tehran has consistently said it wants to control traffic in the chokepoint.

Clashes between the Yemen-based Houthis and Saudi Arabia over the past week have also ratcheted up risks for shippers. The Houthis, a militant group backed by Iran, fired on vessels in the southern Red Sea after threatening any calling at Saudi ports.

A Saudi-led coalition responded with attacks on Houthi positions in Yemen on Friday and Saturday, leading the group to target the Saudi port cities of Yanbu and Jizan with missiles and drones. There was no immediate confirmation from the Saudi government or oil giant Saudi Aramco, whose facilities the Houthis said they targeted.

There haven't been any announcement from the Saudis or Houthis about attacks on one another since early Saturday.