US-Iran peace deal nears—so why are hawks warning of Lebanon, Iraq and Hormuz risks?

US President Donald Trump signaled that a US-Iran peace framework is close, claiming a memorandum of understanding has been “largely negotiated” and that Washington will sign only when it “gets everything we want.” Multiple reports on May 24, 2026 describe parallel diplomatic momentum: Pakistan’s Prime Minister Shehbaz Sharif congratulated Trump for “extraordinary efforts to pursue peace” after Trump’s phone call with leaders of several countries, while Iran’s side says the accord is in the “finalisation” stage. Pakistan’s military and intelligence ecosystem also appears to be involved in the process, with ISPR stating that “intensive negotiations” produced “encouraging progress” toward an agreement as the CDF wrapped up a trip. At the same time, Iranian media coverage via Al Jazeera’s Ali Hashem lays out Tehran’s position on the emerging deal, suggesting the negotiations are now focused on specific terms rather than broad principles. Strategically, the cluster points to a high-stakes attempt to reshape regional risk by trading concessions with Iran while trying to prevent spillover into Lebanon, Iraq, and the Strait of Hormuz. The political economy of the deal is contested inside the US: Senator Lindsey Graham warned that an Iran deal could fuel militancy in Lebanon and Iraq and increase the risk of escalation in Hormuz, effectively arguing that sanctions relief or constraints on Iran could empower proxies. Israeli domestic politics adds another layer of uncertainty, with former Israeli defense minister Avigdor Lieberman accusing Prime Minister Benjamin Netanyahu of humiliating Israel, while a separate report frames the emerging terms as a “nightmare for Israel” and notes senior GOP criticism. In this environment, the “deal in sight” narrative may benefit Iran and the US leadership that wants a breakthrough, but it also raises the odds that hardliners in multiple capitals will pressure for tougher verification, sequencing, or enforcement. Market and economic implications are likely to be concentrated in energy risk pricing, defense and security spending expectations, and regional shipping insurance premia. If a US-Iran agreement reduces the probability of Hormuz disruption, crude-linked risk could ease, supporting sentiment in oil-sensitive equities and lowering hedging demand; however, the hawkish warnings imply that any perceived gap in enforcement could keep a floor under risk premiums. The most direct tradable channel is the oil complex and related derivatives, where even incremental changes in escalation probability can move front-month contracts and volatility. Additionally, defense and aerospace supply chains tied to Middle East security postures may see volatility as investors price the likelihood of continued proxy activity in Lebanon and Iraq. Currency impacts are harder to quantify from the articles alone, but a credible de-escalation path typically supports broader risk appetite, while a contested deal can keep regional FX and sovereign spreads sensitive to headlines. The next phase hinges on whether Washington and Tehran converge on “everything we want” versus Iran’s “finalisation” language, and on whether the deal includes enforceable constraints that satisfy skeptical US and Israeli voices. Watch for formal signing milestones, interim verification steps, and any public clarification of sequencing—especially around sanctions relief, monitoring mechanisms, and timelines for compliance. The key trigger for escalation risk is any deterioration in Lebanon or Iraq that hawks attribute to the deal, alongside any operational signals that raise Hormuz threat perceptions. A parallel indicator is whether regional leaders who are being looped into calls—such as Saudi Arabia, Qatar, and Turkey—use their channels to dampen proxy escalation or to demand stronger guarantees. If the parties move from “largely negotiated” to signature without addressing these concerns, the trend could turn volatile; if they add enforcement and regional deconfliction, the path could de-escalate.

Geopolitical Implications

• 01

  The deal’s success depends on managing domestic veto points in Washington and political backlash in Israel, not just US-Iran bargaining.

• 02

  Regional de-escalation could reduce pressure on shipping lanes, but contested enforcement may sustain proxy dynamics in Lebanon and Iraq.

• 03

  Third-party diplomacy signals broader coalition-building to stabilize the negotiation environment.

Key Signals

• —Clarification of sanctions relief scope, sequencing, and verification mechanisms.
• —Any linkage between the deal and changes in proxy activity in Lebanon and Iraq.
• —Operational indicators affecting Hormuz risk perceptions (maritime incidents, naval posture, tanker routing).
• —US congressional reactions to draft terms and whether they translate into legislative constraints.