The Iran-Israel shadow war erupts

What comes next in Iran-Israel shadow war? [View in browser]( [Bloomberg]( Welcome to a special edition Balance of Power, bringing you the latest on Iran’s attack on Israel. To readers of the Middle East Briefing newsletter: We’re sharing the analysis below. If you haven’t yet, sign up [here](. Iran’s overnight attack on Israel with more than 300 missiles and drones marks a [dangerous new turn]( for a fragile region. This was an unprecedented action, the first strike on the Jewish state from Iranian soil. With help from the US, UK, France and some in the region, [Israel stopped almost every one]( of the missiles and drones launched. No one was killed. Group of Seven leaders will convene to discuss the event today. Some point to the very advertised nature of Iran’s attack as evidence that it wasn’t out to cause extensive destruction but to express anger over the April 1 killing in Damascus of its two senior generals in a strike widely assumed to have been carried out by Israel. Iranians celebrate in the streets of Tehran after the attack on Israel. Source: Bloomberg Prime Minister Benjamin Netanyahu has repeatedly said that if Iran attacks Israel, Israel will attack Iran. Nonetheless, the success of its defense and the embrace from allies who’d been growing deeply impatient with Israel over its war in Gaza lower the chance of an immediate response. President Joe Biden was quick to offer “ironclad” US support for Israel, but reportedly said Washington wouldn’t back an Israeli counterattack against Iran. The Israeli military’s chief spokesman said that the shooting of more than 100 ballistic missiles was no joke; that Iran had high hopes for causing harm, and it failed. Yet all sides now [have cause to pull back](. Israel still has its focus on Gaza, where dozens of its hostages are held and Hamas remains entrenched. Iran, having signaled its intention to attack for nearly two weeks now, said its objectives had been met. Biden, who’s fielding criticism from Democratic voters over his backing for Israel after the deaths of thousands of Palestinian civilians in Gaza, can point to his efforts to prevent a wider war. It’s unquestionably a precarious moment: The commander of Iran’s Revolutionary Guards called it a “new equation” between Tehran and Israel. What comes next will determine whether a line has been crossed. — [Ethan Bronner]( Explosions over Tel Aviv. Photographer: Mostafa Alkharouf/Anadolu/Getty Images Global Must Reads Israel’s external-intelligence agency, Mossad, said Hamas [rejected the latest cease-fire proposal]( from the mediators — the US,  Qatar and Egypt. The latest conflict started when the militant group attacked southern Israel on Oct. 7, killing 1,200 people and abducting around 250. Israel’s retaliatory attack on Gaza has killed more than 30,000 people, according to the United Nations. Palestinians inspect destroyed homes and buildings following the withdrawal of Israeli troops in Khan Younis on Wednesday. Photographer: Ahmad Salem/Bloomberg Israel has upgraded its air defenses considerably over the past decade-and-a-half, adding [new systems for interceptions]( of ballistic missiles fired from as far away as 2,400 kilometers. That range includes Iran as well as Yemen, Syria and Iraq, where militant groups allied with Iran are based. Financial markets will face the coming week fretting about the Middle East, with much riding on whether Iran’s strike on Israel triggers new rounds of retaliation. Many say [oil could surpass $100 a barrel]( and expect a flight to Treasuries, gold and the dollar, along with further stock-market losses. International airlines are weighing their narrowing options to fly between Europe and Asia after [grappling with airspace shutdowns]( in the wake of the first direct Iranian attack on Israel from its soil. Several Middle Eastern countries including Jordan, Iraq and Lebanon announced closures of their airspace as Iran launched drones and missiles. Both Israel and Iran also imposed restrictions on airline traffic over their airspace. FlightRadar24 radar showing empty airspace around Israel, Iraq, Lebanon and Iran yesterday. Source: Flightradar24.com The five-star Sheraton Grand Doha Resort & Convention Hotel — with its private beach and opulent marble lobby — functions as both luxury resort and nerve center of crisis diplomacy. It’s a symbol of how Qatar’s ruling Al Thani family [parlays its wealth into geopolitical influence](, most recently as a key mediator for the Israel-Hamas war.  More from Bloomberg - Check out our [Bloomberg Investigates]( film series about untold stories and unraveled mysteries - [Bloomberg Opinion]( for a roundup of our most vital opinions on business, politics, economics, tech and more - [Next Africa](, a twice-weekly newsletter on where the continent stands now — and where it’s headed - [Economics Daily]( for what the changing landscape means for policy makers, investors and you - [Green Daily]( for the latest in climate news, zero-emission tech and green finance - Explore more newsletters at [Bloomberg.com](. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it's here, it's on the Bloomberg Terminal. 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