The Iran-backed Hezbollah militia rejected a new ceasefire in Lebanon on Thursday and Israel said it would not withdraw troops from the country, undermining US President Donald Trump's efforts to halt fighting there to forge peace with Tehran.
Iran has made a ceasefire in Lebanon a condition for any peace deal with Washington, and has suggested in recent days that it could intervene directly if Israel keeps up attacks there.
However, Hezbollah leader Naim Qassem rejected a US-brokered agreement between Israel and the Lebanese government to halt the fighting.
Hezbollah had not been party to the negotiations. There was no immediate response from Israel, Lebanon or the US.
Israel kept up strikes in southern Lebanon, and Defence Minister Israel Katz said Israeli forces would not be withdrawing from the area or halting operations in the country, which they invaded in March in parallel with the war in Iran.
The commander of Iran's Revolutionary Guards Quds Force — which established Hezbollah in 1982 — said Israel must at a minimum withdraw to positions it held before the war began.
MORE MODERATE SHOOTING
Along with Lebanon, residents of Gaza, northern Israel and Kuwait have all been under fire this week, despite US-arranged ceasefires that are supposedly in force.
Trump said on Wednesday that the agreements involved "shooting in a more moderate manner," rather than a total halt in fighting.
Iranian and US forces traded attacks in the Gulf on Wednesday in one of the most intense bouts of fighting since early April, when a ceasefire halted large-scale hostilities.
Iranian forces struck Kuwait's airport, killing one person and injuring more than 60, authorities said, while the US military carried out strikes near the Strait of Hormuz.
The strait normally handles a fifth of the global oil and liquefied natural gas supplies, but has been largely closed since the war began three months ago.
Iranian oil exports have fallen to their lowest level in six years, according to shipping data, but global oil prices fell by about 3 per cent on hopes that the Lebanon ceasefire could help Washington and Iran find a diplomatic off-ramp from their war.
There has been little evidence of diplomatic progress, though Trump has repeatedly declared since late March that a deal is close.
Trump is under pressure at home to bring down fuel prices ahead of November's congressional elections, and he faced a rare rebuke on Wednesday, when the House of Representatives voted to block him from continuing the war.
The vote is largely symbolic, as Trump is unlikely to sign it into law.
Iran's Supreme Leader Ayatollah Mojtaba Khamenei said on Thursday that Iran's enemies had already been defeated on the battlefield and were now seeking to sow internal divisions.
Khamenei has not been seen in public since he succeeded his father, who was killed in an airstrike at the start of the war.
Tehran wants access to billions of dollars in oil revenue, waivers on sanctions on crude exports, a lifting of a US blockade on its ports and leverage over the strait.
Trump has said his top priority is to stop Iran from acquiring nuclear weapons. Iran says its atomic programme is for peaceful purposes.
The UN nuclear watchdog said on Thursday that it found Iran's nuclear programme to be largely unchanged despite three months of war.
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