Ongoing violence between Israel and Hezbollah, coupled with stalled implementation of the June 2026 US-mediated framework agreement, underpins trader expectations that full normalization remains improbable before 2027. The framework outlines a sequenced process linking gradual Israeli withdrawal from southern Lebanon to verified Hezbollah disarmament and Lebanese army deployment in pilot zones, but Hezbollah has rejected the terms and vowed to retain its weapons. Recent IDF operations dismantling Hezbollah infrastructure, continued strikes in southern Lebanon, and Lebanese President Joseph Aoun’s statement that no new talks are occurring at present have slowed momentum. With Israel facing elections and talks postponed until October, the path to mutual recognition, diplomatic relations, and a comprehensive peace treaty faces substantial structural and security barriers.