Summary:

• Middle East braces for Israeli ‘retaliation’ attack on Iran after Israel War Cabinet meets
• Israeli Air Force says it has completed ‘preparation’ and that an attack is ‘imminent’
• US officials tell WSJ they believe Israel will launch an anti-Iran operation today
• IDF Chief of Staff Lt. Gen. Herzi Halevi: Iranian missile and drone attack on Israel “will be met with a response.”
• Netanyahu orders military: draw up a list of targets
• Several major airlines canceling flights to Tel Aviv and whole region.
• State Dept spox: “commitment to Israel’s security is sacrosanct”.
• G7 working on measures against Iran as China, Russia signal weekend attack won’t hurt relations with Tehran
• European allies urge Israel against military response
• Tehran warns that it’s ready to hit back harder.
• IRGC says it is willing to hit back from Iran for any new Israeli escalation, including then it attacks in Syria.

Update(1329ET): It appears things are moving fast, via Israel’s Channel 12 broadcaster, following the earlier conclusion of Israel’s War Cabinet meeting:

THE ISRAELI AIR FORCE HAS COMPLETED ITS PREPARATION FOR AN IMMINENT ATTACK AGAINST IRAN

The Times of Israel top headline has switched to: War cabinet decides to hit Iran back hard, hopes it won’t spark regional war

A host of airlines have canceled flights to the region, including the following:

Germany’s Lufthansa has suspended its regular flights to and from Tel Aviv, Erbil, and Amman, up to and including Monday. Flights to Beirut and Tehran will remain suspended until at least Thursday.

KLM cancelled all flights to and from Tel Aviv until Tuesday, a spokesperson for the Dutch arm of Air France says.

Britain’s easyJet on Sunday paused operations to and from Tel Aviv. The carrier said in an emailed statement to Reuters that it will temporarily pause operations to and from Tel Aviv until April 21.

Wizz Air says it had cancelled most of its flights to and from Tel Aviv, Saturday through Monday.

Finnair has suspended operations in Iranian airspace until further notice, which may cause longer flight times on flights from Doha. A spokesperson said the Finnish carrier will reroute over Egypt, resulting in delays of a “few minutes.”

IRGC threatens “new equation”:

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Update(1225ET): Israel is looking to “send a message” against Iran, but short of causing outright war and mass casualties, a top level official has told The Washington Post. During Monday’s Israel War Cabinet meeting, Prime Minister Netanyahu is reported to have requested defense leaders to draw up a list of targets.

According to Washington Post’s reporting:

Prime Minister Benjamin Netanyahu has asked the Israel Defense Forces to provide target options, according to an official familiar with high-level discussions, who said Israel is looking at options that would “send a message” but not cause casualties.

Those options include a potential strike on a facility in Tehran or a cyberattack, according to the official, who spoke on the condition of anonymity due to the sensitivity of the talks.

“Everybody agrees that Israel must respond,” the official said. “How to respond, when to respond, is the question.”

Israeli officials are now signaling to their US counterparts that they would like the White House’s backing and coordination for retaliation, however, so far President Biden has urged restraint. This weekend the president clearly said the US will not back an Israeli military attack on Iran, on fears it would spark a bigger war.

Biden has issued what appears an ambiguous statement, and Israel’s military says it is preparing:

• BIDEN: US COMMITTED TO ISRAEL’S SECURITY AND FOR CEASE-FIRE

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Update(1145ET): Israel’s war cabinet has issued a statement, reported in the country’s Channel 12 broadcaster, according to breaking reports:

Israel wants to embark on action against Iran coordinated with US, channel 12 says — Reuters

Channel 12 has cited top Israeli ministers to say that the military’s objective will be to “hurt Iran without causing all-out war,” according to news wires.

But the Biden administration has already said it will not back a retaliatory attack on Iran, amid fears of the situation spiraling into all-out regional war.

As for Tehran, it is warning that in the face of any Israeli assault it will hit back harder. According to BBC Iran correspondent Kasra Naji:

Iran’s IRGC commander: in new equation every time Israel attacks our interests, assets, personalities or citizens, we will hit back from our soil. Israel’s Def Minister: we won’t accept an equation in which Iran responds with a direct attack every time we strike targets in Syria.

Recall that before the Saturday night Iranian attack, Israel’s leadership vowed that a major response would happen if the Islamic Republic directly attacks Israel from its soil. Indeed that’s precisely what Iran did – it launched hundreds of drones and ballistic missiles directly from its territory.

Meanwhile in Iran:

Iran has lifted suspensions on domestic and international flights from its capital, Tehran, the state-run IRNA news agency reported, possibly signaling a return to stabilization for now.

It comes as Israel weighs its response to the strikes and world leaders call for restraint.

Global airlines faced ongoing disruptions to flights after Iran’s missile and drone attacks on Israel narrowed options for planes navigating between Europe and Asia.

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Update(1030ET): The Wall Street Journal issued a mid-morning report citing US officials who predict that Israel will quickly launch a military response on Iran, and that it’s expected to come as early as today…

U.S. and Western officials anticipate that Israel will quickly respond to Iran’s attacks, as soon as Monday, officials said. But the officials said they hoped both countries could come away with a sense of victory, giving them an off ramp that would limit escalatory moves.

Israel’s war cabinet convened again Monday (but there are contradictory reports), however it has as yet issued no clear decision (nothing communicated to the public at least) – and the question of whether the Netanyahu government has decided to pursue retribution on a military level remains open. It will likely be a ‘surprise’ attack – and the public will hear about it only when missiles are airborne.

The WSJ report is also full of caveats while presenting the alarming assessment of US officials:

Israel might also choose to defer action until a later point. One option is “‘we will respond, but not immediately.’ Iran will give Israel reason to respond and retaliate in future,” said Ehud Yaari, a fellow with the Washington Institute for Near East Policy. “I think it’s very clear at this point that Israel would have to do something about Iran at some point, but not now,” he added.

Shortly on the heels of the WSJ quote being issued, Axios issued its own bombshell which points the way to an Israeli response to Tehran being imminent:

Israeli Minister of Defense Yoav Gallant told Defense Secretary Lloyd Austin Sunday that Israel has no choice but to respond to the unprecedented missile and drone attack launched by Iran over the weekend, a U.S. official and another source briefed on the call told Axios.

Oil is surging on the twin Axios/WSJ headlines…

Leading European countries, including the UK, France and Germany are pleading for Israel to hold off on fears that the whole region could slide into a major war. The Biden administration has thus far been clear that it does not support Israel retaliation attacks at this point. Biden told PM Netanyahu to “take the win” after Iranian drones and missiles by and large failed to inflict significant damage or casualties.

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As Israel’s war cabinet again meets Monday to debate how to respond to Iran’s first-ever direct attack on Israel, intense international reaction continues, with leading European countries joining the Biden White House in urging restraint. The United Kingdom, France and Germany have condemned the weekend Iranian attack which saw hundreds of drones and ballistic missiles target Israel, but they are warning against an Israeli counterattack, saying that this would assure that an all out war-is sparked. British Foreign Secretary David Cameron said that while Israel’s mulling a military response is understandable and justified, the country must “think with its head as well as its heart, to be smart as well as tough.”

Cameron told BBC the UK’s position is that Israel will be better to not retaliate because the Saturday night attack was a “double defeat” for Iran in that its assault failed to result in major damage despite over 350 projectiles launched, and that at the same time Tehran is coming under world condemnation and isolation. Cameron said the aggression has revealed “to the world that [Iran is] the malign influence in the region prepared to do this.”

This is consistent with Biden’s words to Prime Minister Netanyahu in the Saturday overnight hours when he told the Israeli leader to “take the win” and don’t retaliate. The US is hoping Israeli decisions-makers “slow things down” at this point to avoid spiraling into major war. Washington has also affirmed it will not back any Israeli military action against Iran.

French President Emmanuel Macron also acknowledged to a French outlet Monday that the situation is “very unstable” and that Israel must show restraint. “We will do everything to avoid a conflagration,” he said to BFMTV news channel.

But Iran has accused Britain, France, and Germany of “double standards” after they all condemned the Iranian attack. On Sunday Iran’s foreign ministry summoned their ambassadors over the “irresponsible stance”, according to the semi-official Iranian Labour News Agency.

Iran has further once again lashed out at the UN Security Council, pointing out that it failed to condemn the April 1st Israeli aggression against its consulate in Damascus which killed two top generals and several others. “The Security Council… failed in its duty to maintain international peace and security,” Ambassador Amir Saeid Iravani said during Sunday’s session.

He said his country “had no choice” but to react in a “necessary and proportionate” and proportionate way while still asserting the Islamic Republic does not  “seek escalation or war.” However, he underscored that “If the US initiates military operations against Iran, its citizens, or its security and interests, Iran will use its inherent right to respond proportionately.“

Russia too has called for restraint, but defended Iranian actions as done in self-defense. “We have repeatedly warned that the numerous unresolved crises in the Middle East, primarily in the Palestinian-Israeli conflict zone, which are often fueled by irresponsible provocative actions, will lead to an increase in tension,” its foreign ministry said.

Unlike the West, Russia firmly condemned the prior Israeli attack on Iran’s sovereign embassy:

Russian Foreign Minister Sergei Lavrov on Saturday held phone talks with Iranian counterpart Hossein Amir-Abdollahian. The Russian Foreign Ministry said Lavrov reiterated “decisive condemnation” of an Israeli strike in Syria this month that killed Iranian generals.

Russia has previously condemned Israel’s conduct in its six-month war in Gaza.

Regional media noted of Moscow’s stance: “Russia noted Tehran’s claim that the attack was made within the right to self-defense after the strike in Damascus, which Moscow condemned.”

Interestingly, deputy chairman of Russia’s Security Council Dmitry Medvedev said on Telegram that “America does not want a big war in the Middle East” as “The killings in Gaza worsen Biden’s prospects in the elections, and war between Israel and Iran would introduce additional uncertainty.”

The below is some additional commentary via Bill Blain and his Morning Porridge blog…

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But, of course, the big issue is the Middle East.

Markets don’t like uncertainty – even though uncertain markets often offer the best opportunities. The current wisdom is that it’s all utterly dependent on how Israel responds – will they go big with an all-out strike on Iran bases and its nuclear capability, or will they take the apparent win Iran granted them over the weekend?

There has been something of the sense of a well-choregraphed dance between Israel and Iran circling each other over recent weeks and months – very aware it’s not what is done, but how actions are perceived. Everyone expected the well-flagged Iran attack over the weekend. That’s why Oil prices barely wobbled. After a few words of predictable fury, this morning there are signs an Israeli stand down might be on the cards – which would favor markets. Doesn’t mean it’s over – revenge is oft a dish best tasted cold and considered.

The weekend strikes gave Israel a tactical win. After Israel took out key Iranian generals in a pinpoint surgical missile strike on Iran’s embassy in Damascus, over 300 Iranian missiles, drones and rockets rained down, mostly in broken bits over deserts outside Israeli borders, swotted out the skies by Western and Israeli defence tech. Iron Dome and other systems were shown to work effectively.

But, strategically it might be a win for the Iran/China/Russia Axis. The strike’s apparent abject failure may have been exactly what the Iranian war planners expected. They would be very aware of how Russian drone and missile strikes have fared in Ukraine. The attack would have provided valuable information by forcing Israel to reveal just how effective their top of the range tech defences are at a time when global opinion meant there was a significantly reduced likelihood of a devasting Israeli counterstrike.

The Russians will be factoring countermeasures garnered from the strike into their current glide missile assaults, while the Chinese will already be pouring over the data to determine the practicalities of taking out similarly protected US carrier task forces in the South China Seas at some future date.

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Meanwhile…