US Withdraws Threats Against Iran but Israel Remains Unrelenting; Wall Street Not Optimistic About Peace Prospects

Sources familiar with the matter revealed that before Donald Trump decided to withdraw his threat to destroy Iran’s electrical infrastructure, U.S. allies and Gulf countries privately warned him that carrying out such a threat could be dangerous.

On Monday, Trump announced he would pause attacks on Iran for the next five days, stating that dialogue with Tehran had convinced him that a resolution to the conflict could be reached.

Sources said that Trump’s decision came after some allies warned that the war was rapidly escalating into a disaster. Regional partners told the U.S. that permanently damaging Iran’s infrastructure would almost inevitably lead to a “failed state” after the conflict ends.

The retreat also aligns with another interest of the president: calming the markets, which have been volatile due to his threats and ongoing tensions. According to insiders, Trump’s decision was announced shortly before U.S. markets opened, partly to ease market concerns.

“Trump needs a way to step back from a threat that would surely trigger a new escalation. Targeting civilian energy infrastructure crosses a new threshold and could constitute war crimes,” said former Deputy Assistant Secretary of Defense for Middle East Affairs Dana Stroul. “Announcing a five-day ceasefire and negotiations before the markets opened on Monday morning was definitely not a coincidence.”

On Monday, Trump told reporters that Iran had proactively reached out to the U.S. for negotiations, eager to reach an agreement.

He said an Iranian official spoke with Jared Kushner and Middle East adviser Steve Witterkov on Sunday, and Tehran agreed to hand over its nuclear material and not resume its nuclear program. He added that negotiations were expected to continue via phone on Monday. When asked who would control the crucial Strait of Hormuz under such an agreement, Trump said, “Maybe me and Ayatollah, whoever that Ayatollah is.”

Pakistani Army Chief Asim Munir spoke with Trump on Sunday, and Pakistani Prime Minister Muhammad Shabaz Sharif held talks with Iranian President Ebrahim Raisi on Monday.

However, Iran’s Foreign Ministry denied any such talks to the official Mizan News Agency. Parliament Speaker Mohammad Bagher Ghalibaf posted on social media Monday that Trump’s claims were fake news, meant to manipulate financial and oil markets.

“We will see how things develop. If all goes well, we will ultimately resolve this issue,” Trump said. “Otherwise, we will continue to strike hard.”

Insiders said the president’s decision to halt planned strikes on energy facilities was to curb rising oil prices, and Trump acknowledged this connection on Monday.

“Once an agreement is reached, oil prices will drop like a rock,” Trump said. “I think they started to drop today. So, we have a very good chance of reaching an agreement.”

This motivation has raised doubts among Washington and Wall Street about prospects for peace. Trump has a history of retreating from maximum pressure tactics, Iran has previously delayed nuclear negotiations, and recent U.S. efforts to use negotiations with Tehran as a pretext for new military actions have fueled skepticism among diplomats and traders about whether any real deal can be achieved.

Equally concerning, Iran immediately denied any such talks occurred and claimed victory.

Iran’s semi-official Fars News Agency quoted an anonymous Iranian source saying, “He retreated after hearing that our goal would be all power plants in West Asia.” Following the Fars report, crude oil prices recovered about half of their losses, and some traders questioned the accuracy of Trump’s statements.

Trump insisted he was communicating directly, but many U.S. allies remain cautious and are watching closely, given his history of shifting positions during the three-week conflict.

Trump acknowledged that his negotiation partners are not Mohajer Tavakoli Khamenei; he said the U.S. has not yet received direct communication from the new Iranian leader and is unsure if he is still alive. However, intelligence suggests that Witterkov and Kushner are dealing with Iran’s true power centers.

Nevertheless, this ceasefire carries risks and could ultimately validate Iran’s approach, especially if negotiations fail.

“Tehran might be more confident that if they threaten the U.S., especially by targeting energy infrastructure in the Persian Gulf, they can force the U.S. to back down,” said former National Intelligence Officer for Near East Affairs Jonathan Panikoff. “In their view, Iran not only wins but also enhances its deterrence.”

Trump did not specify whether he would restrain himself from attacking Iranian military bases during the five-day extension. An Israeli official said Israel has seen no signs that the war is ending and plans to continue operations while avoiding energy assets.

Two officials said Israel was informed of the decision before Trump posted, and within an hour of his post, the Israeli Defense Forces announced strikes in Tehran’s heartland. It remains unclear whether this decision marks the beginning of ending the conflict. An Israeli military spokesperson said the war has not paused and fighting continues.

Trump admitted he discussed negotiations with Israelis but predicted they would ultimately accept an agreement.

“I think Israel will be very satisfied with what they have,” Trump said. “We just spoke with Israel. I think they will be very happy. If this works out, it will be peace for Israel—long-term, guaranteed peace.”

According to a senior Middle East diplomat, in the days before Trump announced the news, the most active secret channels of communication with Iran were convened by Turkey and Oman. Another diplomat said information was passed between Riyadh, New Delhi, and Cairo. It is unclear what impact these discussions had on Trump’s decision.