On Sunday, Hezbollah fired anti-tank missiles against the Israeli military, the first incident of its kind since the 2006 war between the two sides. This followed an Israeli drone attack a week earlier on a building housing Hezbollah’s media center in Beirut’s southern suburbs. It was later suggested that Israel had targeted an industrial mixer necessary for the production of propellant for missiles.

In the aftermath of the attacks, Hezbollah Secretary General Hassan Nasrallah announced that Hezbollah would retaliate from Lebanese territory for the drone attack. After the party did so on Sunday, both sides could claim success. The Israelis for having purportedly destroyed equipment critical for Hezbollah’s missile manufacturing capacity, Hezbollah for having reaffirmed its deterrence capabilities. Even as both sides scored points with their constituencies, neither seems to want a war. There are several reasons contributing to this.

The escalation needs to be seen in light of the broader regional standoff between Iran and the United States. It is becoming increasingly clear that while the United States has used sanctions to tighten the economic and financial noose around Iran, Israel has been tasked with upping the ante on the military front. In light of this, Hezbollah viewed retaliation for the drone attack as necessary to deter Israel’s efforts to change the rules of engagement with the party, whom the Israelis have accused of manufacturing precision missiles. Therefore, even as they fired on each other, both sides were focused mainly on defining the parameters of their future confrontation, not on mobilizing for a major conflict—at least for now.

This desire to change the rules of the game has been accompanied by an increase in U.S. sanctions against Iran and Hezbollah since Washington pulled out of the nuclear deal with Iran in May 2018. Among the targets in recent months have been Iran’s Islamic Revolutionary Guard Corps, the central bank governor, the foreign minister, as well as Iran’s space agency. In Lebanon, Hezbollah parliamentarians Amin Sherri and Muhammad Ra‘d have been sanctioned, as has the Jammal Trust Bank, which stands accused of facilitating the party’s financial transactions.

Israel, in turn, has widened its attacks against Iran and its proxies to encompass Iraq and Lebanon, while pursuing airstrikes in Syria. These have included hitting military bases and a weapons depot in Iraq associated with Iranian affiliates or proxy forces, as well as a convoy in Qaim, along the Iraqi-Syrian border, of the Hezbollah Brigades faction that operates as part of the Popular Mobilization Forces. Israel has also bombed what it claimed to be a drone-operating cell in Syria which was planning to attack Israel. Two Hezbollah operatives were killed in that attack.          

Meanwhile, a diplomatic front has opened up thanks to an initiative from French President Emmanuel Macron during the G7 summit. Iranian Foreign Minister Mohammed Javad Zarif was invited by the president to Biarritz to hold talks. Zarif’s presence brought into the open European diplomatic efforts to reduce tensions between Tehran and the United States, while also ensuring that the Iranians continue to respect the nuclear deal signed in 2015.  

It was noteworthy that in Biarritz U.S. President Donald Trump did not exclude a summit with Iranian President Hassan Rouhani. While in early September Rouhani ruled out direct talks with Washington, Iran would like to see diplomatic progress. It is keen to see a more effective trade mechanism put in place by the United Kingdom, France, and Germany to circumvent U.S. sanctions on Iranian oil. That is because the sanctions are biting. According to the International Monetary Fund, inflation could reach 40 percent in Iran this year, while the economy is expected to shrink by 6.9 percent, having contracted by 3.9 percent last year. Sporadic protests have occurred across the country as a result of socioeconomic discontent.

Iran’s economic woes are apparently also being felt in Beirut. Press reports indicate that because of sanctions and a reduction in Iranian aid, Hezbollah has asked its core constituents to prepare for difficult times ahead as subsidized services and other forms of support are cut. This comes at a time when Lebanon is facing significant economic woes. The debt has reached 158 percent of GDP, alongside high unemployment and little growth. The president, parliament speaker, and prime minister met on September 2 to launch an economic emergency plan. As economic conditions deteriorate, domestic pressure on Hezbollah to avoid an all-out military escalation with Israel is mounting. In August, Fitch Ratings downgraded Lebanon’s long-term foreign currency issuer default rating to CCC from B-.

The destruction that Lebanon faces in a conflict with Israel would not only send the country back decades, it might also cause significant damage to Hezbollah. By engaging in a measured response to Israeli actions, the party and Iran have shown that they understand what is at stake. By going along with a war between Hezbollah and Israel, Iran would be sacrificing its crown jewel in the region. Tehran prefers to keep Hezbollah intact for now, acting as a deterrent for a time when Iran itself might be at risk of attack by Israel.

Finally, beyond economic sanctions and the nuclear deal with Iran, a less visible war is raging between Iran and the United States and Israel. Last month, the U.S. canceled a planned military attack against Iran in retaliation for the downing of a surveillance drone and replaced it with a cyber attack that knocked out an Iranian database allowing it to target shipping in the Persian Gulf. This is happening as many sides in the Middle East are increasingly resorting to new methods of warfare, whether drones or cyber operations, that are rewriting the rules of conflict in the region. 

What the altercation between Hezbollah and Israel points to is a new normal in the region. Drone attacks and cyber conflicts allow all sides to score points with minimal costs to themselves. However, as the different parties dance close to the precipice, any small miscalculation risks plunging the region into chaos.