US strikes Iran’s Qeshm Island on the eve of the midterms as Vance says talks have made progress

US forces carried out limited strikes on Iran’s Qeshm Island in the Strait of Hormuz on Monday, according to US officials^4,10. Iran’s state news agency reported several explosions on the island². A US official described the attack as “a defensive measure for Iranians using surface to air missiles against US assets”¹⁴. The Pentagon referred questions to US Central Command, which did not respond⁴.

US officials said the Revolutionary Guard has routinely targeted and shot at US manned and unmanned aircraft over the strait¹⁰, and accounts of Monday’s events include the Guard firing on a US aircraft². Officials in Washington reportedly kept the strikes under wraps to avoid signalling a major resumption of hostilities¹⁵. The episode is also the latest in which the Pentagon under Defense Secretary Pete Hegseth has withheld information that could be politically damaging¹¹.

On Tuesday the Revolutionary Guard said its air defence units shot down two US LUCAS attack drones over Bandar Khamir¹⁶. Ghalibaf told parliament that Iran was at its highest level of defensive readiness, and Tehran warned of a “new battlefield”¹⁷.

Why it matters to investors

The strikes landed in the middle of a diplomatic push. Vice President JD Vance said on Monday he was optimistic about reaching a “negotiated settlement” with Iran⁷, and that the US had “certainly made some progress” in talks⁹. His optimism concerns a deal that would prevent President Donald Trump’s threatened strikes on Iran⁸. Trump himself talked down the risk of war¹.

Iranian officials sound further apart. One said a deal to end the war remained distant because of “excessive” US demands²¹, and a settlement is still out of reach despite heightened diplomatic efforts²⁰. Iranian President Masoud Pezeshkian has said Supreme Leader Ayatollah Mojtaba Khamenei granted the government certain authorities for peace talks¹³.

Oil prices rose after the strikes as supply concerns returned^12,13. The rebound followed a selloff of more than 7% on Monday that came amid renewed diplomatic discussions¹².

What to watch

Trump has said he is “in no rush” to decide on further strikes¹⁹. CIA Director John Ratcliffe is advising him to maintain a “no war, no deal” approach toward Iran and let economic pressure work¹⁸. Treasury Secretary Scott Bessent and Secretary of State Marco Rubio are reported to be giving him similar advice¹⁹.

Outside the region, Russia called signs of new military action against Iran “extremely alarming”²². For energy markets, the open questions are whether the Revolutionary Guard keeps firing on US aircraft over the strait¹⁰, whether Washington keeps describing its strikes as defensive¹⁴, and whether either government’s account of the talks changes after the US vote^9,21.