Open-Ended War
There is no indication that the war will end soon, but rather that it will expand.
Summary: The war in Gaza appears to be open-ended. Talk in Israel about escalation against Hezbollah is intensifying, with speculation that war would breakout before mid-August 2024, but in reality Israel is stuck. Hezbollah is undeterred, and is seeking to maintain a limited war of attrition to support Hamas. If this escalates to all out war, devastation to Lebanon and to Israel would be unprecedented. Israel’s political divisions may well lead to escalation, however.
Analysis:
Israel’s dilemma is this: militarily, a war against Hezbollah is an uncertain gamble, but politically, it is an absolute necessity. PM Netanyahu, Defence Minister Gallant and Chief of Staff Halevi have been repeatedly threatening such escalation for several months. However, Israel is nowhere near winning in Gaza, making such escalation difficult. Rather, what we are seeing is that the Resistance Axis has become comfortable with an extended war of attrition, accepting the risk that such a war would escalate well beyond the current conflict.
We ask clients to reach out directly to discuss commercial implications, as such escalation will be a complete game changer, and would change Israel’s and Iran’s relationships with Jordan, Egypt and Türkiye.
Below, we discuss some of the dynamics affecting the risks of such escalation.
No ceasefire
Hamas responded on 11 June to Israel’s latest ceasefire proposal. US Secretary of State Blinken said that the amendments Hamas made were unacceptable. Taking Blinken’s statement at face value, it seems that Hamas is still attempting to dictate conditions, meaning that it is nowhere near surrendering. This aligns with our initial forecast, that Israel cannot achieve its declared military objectives. It also aligns with US and Israeli intelligence assessments that Israel can still fight. This shows that the Gaza war is open-ended, and along with it, the Red Sea blockade, the fighting along the Israel-Lebanon border, the unrest in Jordan, and the risk of escalation.
Israeli troubles in Gaza
Israel has had one success since the 7 October war began: it managed to free four captives on 8 June in a major military operation in Nusairat refugee camp (there had been a previous successful rescue of two captives in February, but the details were much murkier).
The Nusairat operation showed all the trouble that Israel was facing: the captives were being held in civilian homes; the neighbourhood where the captives were held rose up to fight the Israeli special forces sent to liberate the captives; this led the Israeli Air Force and artillery units to engage in attacks that may have killed over 200 Palestinians (Israel claims there were under 100 casualties, both dead and injured). What this showed is that most of Gaza backs Hamas, especially the refugee population (expelled from their homes in 1948), who view armed resistance as the only means of returning to their homes. This leads us to three conclusions:
This war will not end on Israel’s terms so long as there are Palestinians are in Gaza, as Hamas is fully integrated into the population.
Israel does not have the power or regional support to force the Palestinians out.
Hamas’ great success in 7 October was in bringing back the ground war and turning it into a war of attrition against Israel, which favours Hamas and the Resistance Axis.
Militarily, note that Hamas crossed the Rafah/Karm Salem border on 6 June in an undetected tunnel, with the intent of breaking into a settlement or military position. On 26 May, Hamas took an Israeli soldier's body in a successful ambush - they added a new captive. Hamas is also firing missiles into Israel still. For its part, the Israeli military is playing whack-a-mole, chasing Hamas operatives up and down the Gaza Strip, without being able to hold territory and keep it under their control, or to clear the tunnels, or to make the Gaza Envelope (the Jewish communities around Gaza) safe for their residents.
Hezbollah’s capabilities
When thinking of potential Israel - Hezbollah escalation, we ought to recall the following: Hezbollah has already taken out most Israeli surveillance systems in the north, blinding it. In the past few days, Hezbollah took out an Iron Dome launcher with a drone, one of Israel's most sophisticated radars, and two Hermes 900 reconnaissance armed drones. It also fired over 100 missiles and drones into the core of Israel’s northern defence in Tiberias and Safad on 12 June, and another 100 in the general area of the north. None of these was a first, but they demonstrate that:
Hezbollah can knock out Israeli air defence.
It can rain down thousands of missiles per day after knocking out air defence systems, maximising the damage and requiring Israel to focus remaining air defence systems on critical targets.
It can blind Israeli intelligence collection during a war - including from drones. This would severely impact Israel’s ability to update its target bank and to respond to Hezbollah attacks.
Hezbollah retains these capabilities even after 8 months of geographically limited but very intensive conflict against Israel. We can therefore assume that Hezbollah can maintain these capabilities for at least another 8 months, if not 8 years. Recall the Ansar Allah experience in Yemen, where the group kept getting stronger despite 8 years of attacks by Saudi Arabia.
Moreover, a war with Hezbollah would expand to include Iraq and Syria far more intensively. So far, attacks from Iraq and Syria are only a fraction of what they can be, given that Iran has had since 2012/2013 to prepare for a war with Israel from these territories. We also assume that:
Yemeni anti-ship capabilities that we have seen so far are a small fraction of Hezbollah’s, let alone Iran’s, capabilities.
Iran would make far more weapons available in Iraq, Syria and Lebanon if Hezbollah were threatened, as Hezbollah will always be a bigger Iranian priority than Yemen.
Hezbollah has long range drone and missile bases in Syria and Iraq that it has not activated so far.
Fighters from Iraqi militias would join the war against Israel in the Golan in an extreme all-out war scenario.
Having failed in Gaza, would Israel really risk a war with Hezbollah, given the consequences? Israeli hubris may indeed lead to this outcome, and form part of an attempt to draw the US into a regional war. But it would be hubris, and the consequences for Israel would be dire.
Rules of the game
A remarkable feature of the ongoing Israel - Hezbollah conflict has been the ability of Hezbollah to impose “rules of the game” by inflicting a high cost on the Israeli military and on civilian assets - not civilians. Those unfamiliar with Israel’s wanton abandon in targeting Lebanese civilian infrastructure in the ‘93, ‘96 and ‘06 wars may not understand this. That Israel is keeping away from attacks in Beirut, or on civilian infrastructure, is down to Hezbollah’s deterrence. It is realistic to assume that this will hold, limiting the conflict and keeping the conflict managed. It is also realistic to expect this to eventually burst into all-out war. Furthermore, it is evident that Hezbollah, having initiated hostilities, is in a reactive role when it comes to escalation, in that it is trying to maintain a tempo of operations that is below all-out war, and in that it is not trying to escalate. Rather, Hezbollah tends to signal its ability to maintain deterrence, not its intent to go to all-out war. This benefits Hezbollah greatly, as the casualties of the war are acceptable to it, but not acceptable to Israel, allowing it to bleed Israel in a lengthy and costly war of attrition. Israel wants to escalate, but so far has been deterred.
Internal fragmentation, external risks
This inability to win militarily is reflected in intensifying disunity between Israeli factions. When the war began, two representatives of the military establishment - former IDF chiefs of staff Gantz and Eisenkot - entered into a national unity cabinet with PM Netanyahu and gained seats on the War Cabinet - the government body charged with running the war. Gantz and Eisenkot resigned on 9 June, blaming Netanyahu for not being able to lead them to victory and called for fresh elections.
Brigadier General Avi Rosenfeld, the Commander of the Gaza Division, also resigned on the same day, attributing his resignation to his failures in the 7 October attack. It was impossible not to see a political message here - namely, that Netanyahu, who had been PM for nearly 14 of the past 16 years, should also resign. How can Netanyahu proceed with the war in Gaza, or escalate against Lebanon, without the military establishment supporting him?
But then there are reverse questions - how can Netanyahu survive politically, and keep his coalition intact, if he does not escalate? And how can Israel survive if it is shown to be deterred by Hezbollah and unable to defeat Hamas? How will Egypt, Jordan and others convince their populations that peace with Israel is a sound strategic choice?