US-Iran ceasefire under severe pressure over Lebanon strikes

Good morning. Here’s what happened overnight and what you need to know today.

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1.

Fragile ceasefire: A two-week US-Iran ceasefire came under severe pressure within hours of taking effect, as Israel launched its largest strikes yet on Lebanon, reportedly killing at least 254 people. Iran responded by stopping the limited tanker passage that had just begun through the Strait of Hormuz and threatening to withdraw from the deal entirely. Iran’s parliamentary speaker Mohammad Bagher Ghalibaf said on X the agreement had been breached three times, citing Israeli strikes on Lebanon, a hostile drone entering Iranian airspace and the denial of Iran’s right to uranium enrichment. “In such situation, a bilateral ceasefire or negotiations is unreasonable,“ he posted. The Revolutionary Guards said they were preparing to respond to the Israeli attacks in Lebanon. Pakistan prime minister Shehbaz Sharif said Lebanon was part of the deal. US vice president JD Vance said the Lebanon dispute was “a reasonable misunderstanding” and that Israel had offered to “check themselves a little bit” in Lebanon to help set up successful US negotiations with Iran. He stressed, however, that was not because Lebanon was part of the ceasefire. He warned there would be “serious consequences” if Iran did not hold up its end of the agreement. Israel had struck what it said were Hezbollah command centres, rocket infrastructure and densely populated residential areas of Beirut, the Bekaa Valley and southern Lebanon, in what it described as its largest operation against the group since the start of the war. About 50 fighter jets hit more than 100 targets with 160 munitions within a single minute, Reuters reported citing the Israeli military. Meanwhile, gulf states reported continued Iranian missile and drone attacks after the ceasefire took effect. Saudi Arabia’s East-West oil pipeline was struck by a drone, though damage was described as limited. (Reuters)(NYT)(Bloomberg)(FT)(Capital Brief)

2.

Relief rally: Global financial markets surged as the US-Iran ceasefire offered the first prospect of relief from the largest oil supply shock since the 1970s, sending oil to its biggest single-day fall since the pandemic. Wall Street had its strongest session in months, with the S&P500 rising 2.5%, the Dow jumping 2.85% and the Nasdaq gaining 2.8%. Brent crude dropped 13% to USD94.75 a barrel in its largest one-day decline since 2020 and the seventh largest on record, according to Dow Jones Market Data. European stocks rose 3.9%, their biggest one-day gain in a year, and Australia’s ASX200 rose 2.55% Airlines, cruise operators and homebuilders, among the hardest-hit sectors during the conflict rebounded sharply. Bond markets were more cautious. US Treasuries initially rallied before giving back gains after Iran’s parliament speaker said the ceasefire had been violated. Exxon shares fell after reporting it lost 6% of global production in the first quarter due to the war, and Levi Strauss jumped over 10% after raising its annual sales and profit forecasts. (WSJ)(Reuters)(Bloomberg)

3.

Exit Rutte: Donald Trump will discuss whether the US should leave NATO when he meets Secretary General Mark Rutte today, in a fresh sign of the US president’s anger over the alliance’s response to the Iran conflict. White House press secretary Karoline Leavitt said the topic would be on the agenda, relaying a direct message from Trump that NATO was “tested and they failed” over the US-Israeli war against Iran. Trump’s grievances centre on NATO allies refusing to help protect commercial ships in the Strait of Hormuz, declining to let the US use their bases to attack Iran, and withholding Greenland, Trump has said. Formally leaving NATO would be challenging, Bloomberg noted. A 2023 law championed by then-senator Marco Rubio (now secretary of state) requires a two-thirds Senate majority or a new act of Congress to suspend or terminate the treaty, neither of which appears achievable. But the publication noted workarounds like troop reductions or funding cuts could erode US participation without formal exit while stopping short of treaty withdrawal. (Bloomberg)

4.

Model ambitions: Meta has unveiled Muse Spark, its first AI model since Mark Zuckerberg tore apart and rebuilt his company’s entire AI operation. Built over nine months under the internal codename “Avocado,” the model is the first from Meta Superintelligence Labs, the new team led by chief AI officer Alexandr Wang. Wang joined Meta as part of the company’s circa USD15 billion investment in his data-labelling company Scale AI. In the coming weeks, the closed model will replace existing models powering chatbots across WhatsApp, Instagram and Facebook, the company said. It is rolling out a shopping mode. Meta said it plans to offer a private API preview to select partners and may open-source future versions. What they said: The launch is a test of whether the social media giant’s multibillion-dollar overhaul of its AI operations can close the gap with OpenAI, Anthropic and Google. According to Meta data shared with media, Muse Spark outperformed rivals in select benchmarks on reasoning and multimodal tasks but acknowledged gaps in coding and long-horizon agentic systems. Meta described it as “an early data point on our trajectory,” adding that larger models were already in development. Bloomberg said the model had been trained using third-party open-source models including Alibaba’s Qwen, as well as ones from OpenAI and Google. (Capital Brief)(Meta)(Bloomberg)(FT)

5.

Grease the wheels: When news first emerged in February that AI infrastructure company Firmus was re-opening its books for yet another pre-IPO equity raise, initial chatter suggested the round would be restricted to new strategic investors only. Instead it was two of the company’s existing backers that returned as the headline participants for the USD505 million ($730 million) raise; Coatue Management and Nvidia. Nvidia returns to the table after facing scrutiny in the US over “circular” transactions it has engaged in with its customers, whereby the chipmaker agrees to invest in a customer, which then uses some of the capital it has raised to commit to buying Nvidia’s chips. Shaun Weick, a portfolio manager at Firmus investor Wilson Asset Management, believes Nvidia’s involvement “greases the wheels” of the broader AI build out. “The demand signals, the execution progress, and the external capital flowing broadly across the ecosystem — they’re just too strong to be dismissed as pure circularity,” Weick said. (Capital Brief)

6.

Fed minutes: The Federal Reserve’s March meeting minutes showed most officials feared the Iran war could reduce growth, while many others warned it could reignite inflation and force the first rate hikes in years. The US central bank held its benchmark rate steady at 3.5% to 3.75% at that meeting for the second consecutive time after three cuts in the final months of 2025. Officials raised their 2026 inflation outlook, with the PCE price index now expected to end the year at 2.7%, up from 2.4% projected in December. A majority still pencilled in one cut this year, though two officials pushed their expectations further out. According to the minutes, some officials argued for adding language to the post-meeting statement explicitly flagging the possibility of rate hikes if inflation remained above target. Most officials, however, judged it “too early to know” how the war would affect the economy. A tentative US-Iran ceasefire has calmed markets and removed the worst-case demand destruction scenario, but it will still pose a complicated path for the Fed, without eliminating the underlying inflation threat. (US Fed)(Bloomberg)(FT)

7.

No cahoots: We may never know what really happened behind the scenes at DroneShield to trigger the double departure of its chief executive Oleg Vornik and chair Peter James after a decade each at the top of the company. But despite the pressure both men have faced after a highly criticised share selldown late last year, the news still caught the market off guard. The stock fell 13.5% on Wednesday, erasing $500 million from its market capitalisation. Speaking to Capital Brief, James stressed that it was an orderly transition process — and that he was not in cahoots with Vornik over a joint exit. “Certainly no plan, certainly not together.” But market watchers are understandably sceptical following the share sales by Vornik, James and fellow board director Jethro Marks just five months ago. Vornik will be replaced by chief product officer Angus Bean while REA Group chair Hamish McLennan has been picked as James’ successor. (Capital Brief)

8.

Price take-off: Delta Airlines, the US’s largest carrier by market capitalisation, said it plans to cut routes and raise the price of tickets as it works to claw back around half of a USD2 billion ($2.83 billion) hit from an expected surge in fuel costs driven by the war in Iran. Delta plans to cut around 3.5% of its passenger capacity between April and June this year, with mid-week routes and overnight journeys most likely to be axed. In an earnings conference call, CEO Ed Bastian told analysts: “High fuel prices have been the most powerful catalyst for change, separating the winners and forcing weaker players to rationalise, consolidate or be eliminated,” having earlier told reporters that Delta is “looking to do more” fare increases beyond what has already been levied. Delivering its March-quarter earnings on Wednesday, the airline reported a first-quarter loss of USD289 million, or 44 cents per share, while adjusted operating revenue rose 9% to USD14.2 billion. (Delta Airlines)(Bloomberg)(WSJ)(FT)(Capital Brief)