Ongoing hostilities between Israel and Iran, including the U.S.-backed military campaign that began in February 2026 with extensive Israeli strikes on Iranian targets, continue to define bilateral ties and preclude any diplomatic normalization. Decades of severed relations since the 1979 Iranian Revolution, compounded by repeated violations of fragile ceasefires and rejected negotiation proposals through mid-2026, leave no pathway for embassy reopening by year-end. Traders assess the probability of such a reversal as negligible absent a fundamental shift in regional dynamics or regime change, consistent with the historical absence of direct diplomatic channels between the two states.