US blocks Israel from Iran combat as oil surges 6% to $78

The White House told Israel to stay out of combat operations against Iran, two Israeli sources said July 10, as President Trump's effort to contain a conflict that has pushed oil above $78 a barrel enters a more volatile phase.

"The US is worried that Israeli involvement would trigger a broader regional war that Washington cannot manage," one of the Israeli sources said, speaking on condition of anonymity to discuss sensitive diplomatic exchanges.

The request comes after Trump declared the fragile June 17 ceasefire "over" and ordered fresh strikes on Iranian air defenses, radars and Revolutionary Guard boats. Global oil prices surged 6 percent on the news, with Brent crude rising to more than $78 a barrel, while the International Monetary Fund downgraded its world economic outlook citing the energy shock. The US is seeking more than $67 billion in war funding from Congress, which remains divided over the president's handling of the conflict.

The Strait of Hormuz handles about 21 percent of global oil trade, and Iran's renewed attacks on commercial shipping — including a Qatari tanker struck July 9 — have demonstrated Tehran's ability to disrupt energy markets even after months of US and Israeli strikes. With Iran's new hard-line leadership emboldened by its survival and Trump running out of patience, the risk of a wider conflagration that draws in Israel, Gulf states and global shipping lanes remains the central worry for markets.

A Ceasefire Unravels in 23 Days

The June 17 memorandum of understanding — which lifted oil sanctions and a US naval blockade on Iran in exchange for talks over the Strait of Hormuz and Iran's nuclear program — lasted barely three weeks. Trump told reporters at the NATO summit in Turkey that the deal was "over" and that dealing with Iranian leadership was a "waste of time," calling them "scum" and "sick people." Iran's foreign ministry responded by declaring "important and fundamental" parts of the accord "ineffective."

The breakdown followed a now-familiar pattern: Iran struck three oil tankers in the Strait of Hormuz on July 9, including a Qatari vessel carrying natural gas that caught fire off the coast of Oman. The US retaliated with strikes on more than 80 Iranian targets, including roughly 60 Islamic Revolutionary Guard Corps small boats. Iran countered with strikes on 85 US military facilities in Bahrain and Kuwait and shot down an MQ-9 drone, according to Iranian state media.

Why Washington Wants Israel on the Sidelines

The US effort to exclude Israel reflects a recognition that the conflict is already straining American military resources and diplomatic capital. Senate Minority Leader Chuck Schumer called the war "Trump's total failure in Iran," saying "our troops are back in harm's way and high gas costs are continuing to punish working families."

The last time Israel conducted a major strike on Iranian territory was Feb. 28, when it killed Supreme Leader Ayatollah Ali Khamenei in the war's opening hours — an act that drew widespread international condemnation and unified Iran's fractured leadership behind a more hard-line successor. Mojtaba Khamenei, the late leader's son, has consolidated power alongside a younger generation of Revolutionary Guard commanders who experts say are more entrenched and hard-line than their predecessors.

Trump himself acknowledged the risk of escalation. When asked about sending US troops into Iran, he dismissed the idea, saying "Why would I go in now? I'd go in when they're completely eliminated or an agreement is made." Still, he floated the possibility of taking over Iran's Kharg Island, a vital oil export terminal, which sent oil prices higher and global stock markets lower.

With the ceasefire in tatters and both sides resuming strikes, the path forward remains unclear. Iran's parliamentary speaker, Mohammad Ghalibaf, struck a defiant tone: "The era of bullying and extortion is over. It leads nowhere. We don't fold." Trump's envoys Steve Witkoff and Jared Kushner continue to push for negotiations, but the president said dealing with Iran is "just a waste of time."

For markets, the key variable is whether the US can contain the conflict without Israeli involvement — and whether Iran's new leadership, emboldened by its survival and in control of the Strait of Hormuz choke point, sees escalation as a winning strategy. Oil options skew and defense sector valuations suggest investors are pricing in a prolonged period of elevated risk.

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