Persistent tensions from the Israel-Hezbollah conflict continue to shape trader views on the low likelihood of formal normalization before 2027. A June 2026 U.S.-brokered framework agreement established limited pilot zones for potential Israeli withdrawals from southern Lebanon, conditional on Hezbollah disarmament and Lebanese army control, yet Hezbollah leaders rejected it outright as invalid and vowed to block implementation. Ongoing Israeli strikes and operations in the south through September 2026 underscore the absence of a durable ceasefire or diplomatic breakthrough. These factors, combined with Hezbollah's entrenched military presence and Lebanon's internal divisions, sustain the market's strong consensus against near-term relations normalization.