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Iran tensions

Trump backs away from conflict after Iran strike kills no Americans

US adds sanctions but oil price drops and stocks surge as tensions ease

U.S. President Donald Trump delivers a statement about Iran at the White House on Jan. 8.   © Reuters

NEW YORK/WASHINGTON/DUBAI -- The U.S. called for peace Wednesday following Iran's attack on two military bases hosting American troops in Iraq, signaling Washington's hope to de-escalate tensions with Tehran.

"The United States is ready to embrace peace with all who seek it," Trump said at a news conference at the White House, which was held to address the Tuesday night attacks.

"The fact that we have this great military and equipment ... does not mean we have to use it. We do not want to use it," Trump said, noting that there were no American or Iraqi casualties in the attacks and Tehran "appears to be standing down."

The U.S. president last week ordered a drone strike that killed Iranian Major General Qassem Soleimani, sparking fears of a full-blown military conflict with the Middle Eastern country.

On Wednesday, the U.S. president announced new sanctions on Tehran and stressed that Iran would never be allowed to have its own nuclear weapons.

The U.S. "will immediately impose additional punishing economic sanctions on the Iranian regime," he said without offering specifics.

He called on other countries to withdraw from the remnants of the Iran nuclear deal and asked NATO to be more involved in the Middle East.

"We must also make a deal that allows Iran to thrive and prosper and take advantage of its enormous potential," he said, adding that the U.S. and Iran should work together on the elimination of ISIS and other "shared priorities."

Asian markets rallied on Thursday after Trump's remarks fueled bets that a large-scale military conflict in the Middle East could be avoided. The Nikkei 225 index rose 1.6% in morning trading, while Australia's S&P/ASX 200 index gained 0.8%.

The increases followed gains in U.S. stocks. The Dow Jones Industrial Average climbed more than 280 points following Trump's remarks, while the Nasdaq set a record-high at closing. 

Oil futures fell more than 4% in afternoon trading in New York after reaching a nearly four-month high earlier in the day. 

The Japanese yen weakened to around 109.2 per dollar. 

Secretary of State Mike Pompeo and Secretary of Defense Mark Esper, who stood by Trump during the news conference, gave a closed-door briefing on Iran to Congress, which left Democrats unconvinced there was ever an imminent security threat to justify the killing of Soleimani or a plan for the future.

But Republicans largely applauded Trump for killing Soleimani while avoiding a full-blown war.

Henry Rome, an analyst with political risk research firm Eurasia Group, said the U.S. and Iran will likely refrain from direct and open conflict this year but expects low-level attacks in Iraq to continue.

"Iran is almost certainly unwilling to engage Trump diplomatically at this stage, but the [U.S. president's] comments offer a clear indication that the president is grasping for off-ramps to the crisis brought about by his decision to kill" Soleimani, Rome wrote in a Wednesday research note.

Iranian state media report that numerous "American terrorists" were killed in the attacks. But some believe Tehran purposefully avoided striking areas with a large U.S. presence, signaling to Washington that it does not want a full-on clash while still maintaining a strong posture at home.

The Iranian leadership wants to appease hard-line conservatives, who are calling for extensive retaliation against the U.S., but avoid a large-scale military conflict with the U.S. that would threaten the regime. The missile strikes, named "Operation Martyr Soleimani," reflected the difficult balance between these interests.

Iranian Foreign Minister Javad Zarif stressed on Twitter that Iran does "not seek escalation or war."

But even if the two sides avoid war, risks of smaller clashes involving artillery fire remain.

"The Iranian strikes on Wednesday were a restrained and calculated move to defend and retaliate against the killing of Commander Soleimani," said Yasuyuki Matsunaga, professor at the Tokyo University of Foreign Studies. "Tehran likely chose the most cautious option, or something close to it, from those under consideration."

"Al Asad air base, a key U.S. hub in Iraq, is believed to have been hit by several ballistic missiles," Matsunaga said. "Iran says the drones that killed Commander Soleimani flew out of this base. The missile strikes happened around the same time as the commander's burial, and likely resonated with the public as it mourned a national hero."

Matsunaga believes that Iran used homegrown ballistic missiles for the attacks, which also targeted a base in Erbil in northern Iraq. "No other Arab country in the Middle East has succeeded in producing such weapons at home, and Iran showed off its military power and technology -- just like it did when it shot down a U.S. drone in June 2019," he said.

"It would be preferable for the U.S. to avoid retaliating assuming there were no human casualties, but there are factions in Iran spreading propaganda that the attack killed many American soldiers," Matsunaga said. "It will be key whether Supreme Leader [Ali] Hosseini Khamenei and President Hassan Rouhani can mitigate such moves by conservatives ahead of the presidential election in 2021."

Additional reporting by Wataru Suzuki in Tokyo.

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