Israel strikes Hezbollah command center in Beirut as 2-month-old conflict escalates

Israel bombed Hezbollah's command center in Beirut's Dahiyeh district on Sunday, retaliating for rocket fire on northern Israel that shattered a 2-month-old ceasefire and sent Brent crude above $85.

"This is the first time Israel has struck Dahiyeh since the November 2024 ceasefire, and it signals a deliberate decision to escalate the cost for Hezbollah," said Nicholas Blanford, an analyst at the Atlantic Council in Beirut.

The strike followed Hezbollah rocket alerts across northern Israel, including Haifa's Krayot suburbs — the first advance warning there since the April 17 truce. Israel has occupied roughly a fifth of southern Lebanon, displaced more than 1 million people and killed over 3,500 since March 2, according to the Lebanese government. At least 31 Israeli soldiers have died in the same period.

The escalation threatens to widen a conflict that has already drawn in Iran and the United States, with Tehran insisting any ceasefire deal must include Lebanon. Brent crude rose 2.3% to $85.70 a barrel on supply disruption fears, while gold climbed above $2,400 an ounce as investors rotated into safe havens.

The Sunday airstrike was the first on Beirut's southern suburbs since Israel resumed its campaign against Hezbollah in March. Prime Minister Benjamin Netanyahu and Defense Minister Israel Katz said in a joint statement that the military had struck "terrorist headquarters" in Dahiyeh, a Hezbollah stronghold, in response to the group's fire toward Israeli territory.

"The rule for Dahiyeh in Beirut is the same as for the communities of northern Israel — if there is no quiet in the north, there will be no quiet in Beirut," Katz said.

Ceasefire in Name Only

The April 17 ceasefire agreement between Israel and Lebanon's government required Hezbollah to stop firing, withdraw from the south and eventually disarm. Both sides have breached its terms. Israel continued strikes on what it called Hezbollah targets, while the group held its fire until March 2, when it launched rockets at northern Israel two days after the US and Israel began attacking Iran.

Since then, Israel has pushed deeper into southern Lebanon, crossing the Litani River for the first time since its 2000 withdrawal. Israeli forces are now about 5 kilometers from Nabatieh, a major Hezbollah stronghold. The military has also seized the Beaufort Ridge, a strategic position it last held in 2000.

The conflict has killed at least 15 Israeli soldiers since a second ceasefire was agreed to in mid-April, according to Israeli military figures. Hezbollah has adapted its tactics, using explosive drones piloted via fiber optic cables to bypass Israeli defenses and strike missile batteries and troop positions.

Market Fallout and Regional Risks

The escalation is reverberating across financial markets. Brent crude has risen more than 12% since March 2, when the conflict began, as traders price in the risk of supply disruptions from the broader Middle East. The Strait of Hormuz, through which about 21% of global oil consumption passes, remains a tail risk if the conflict draws in Iran more directly.

Gold has gained 8% since late February, reaching $2,410 an ounce on Friday, while the VIX, a measure of expected equity volatility, has climbed above 22. The S&P 500 has fallen 3.5% over the same period as investors weigh the risk of a prolonged regional war.

The last time Israel struck Dahiyeh during active hostilities was in September 2024, when it killed Hezbollah leader Hassan Nasrallah. That strike triggered a 6% surge in Brent crude over the following week and pushed gold above $2,600 for the first time.

Lebanese President Joseph Aoun has accused Iran of using his country as a "bargaining chip" in its talks with Washington. Iranian Foreign Minister Abbas Araghchi responded by warning that any ceasefire between Iran and the US must include Lebanon, saying the US and Israel would be held responsible for violations.

The US has proposed a gradual de-escalation plan under which Hezbollah would stop all attacks on Israel in exchange for Israel refraining from hitting Beirut, according to a US official. Hezbollah has rejected the truce, with Secretary-General Naim Qassem calling negotiations "futile and humiliating."

This article is for informational purposes only and does not constitute investment advice.