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Lebanon At Center Of Sharp Escalation Between Israel And Iran; Sources Say Israel To Accept U.S. Request To Halt Strikes On Iran; Expert: Oil Escaping Double Blockade Takes "Some Of The Edge Off"; Iran's Economy Decimated By Years Of Sanctions, Isolation. Aired 10-11a ET

Aired June 08, 2026 - 10:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[10:00:52]

ANNOUNCER: Live from CNN Abu Dhabi, this is CONNECT THE WORLD with Becky Anderson.

BECKY ANDERSON, CNN INTERNATIONAL ANCHOR: Welcome to the second hour of the show from our Middle East programming headquarters here in Abu Dhabi.

The time just after 6:00 in the evening, and it has been a very busy news day in this wider region, a major escalation, and we are at a crossroads

this hour.

It seems two days of aerial attacks between Israel and Iran are on hold, but each side is standing its ground over Lebanon.

Things developing quickly. Here's what we know at this point. Israeli sources now say that Israel will accept a request from Washington to halt

strikes on Iran, but it will continue to target Hezbollah in southern Lebanon. That after an announcement from the Iranian military in the past

couple of hours that it will cease hostilities only if Israel stopped striking Lebanese territory. Well, the flare infighting began Sunday after

Israel struck what it called Hezbollah infrastructure in Beirut.

CNN's Paula Hancocks with us this hour. So, just get us up to speed on where we are at over these past 36 hours.

PAULA HANCOCKS, CNN CORRESPONDENT: Well, certainly, Becky, what we have seen over the past 36 hours is the most significant escalation between the

Israelis and Iran since the ceasefire in early April.

Now, it does appear as though both have pulled back from the brink at this point, or at least both have taken a pause. We heard Iran saying that they

have suspended their military operations. We heard from the President of Iran Masoud Pezeshkian, and I'll read part of his statement. Diplomacy and

defense are the two wings of national power. We have neither abandoned the battlefield nor the negotiating table, so really highlighting there that

both options are still very much open.

But we did hear from Iran that if Israel was going to continue to strike against Lebanon, then they would have a more crushing response, was their

words.

Now, what we heard from the Israeli side is that they have agreed to pull back as well. It certainly does appear as though that was a request from

the Trump administration. We know that President Trump and Benjamin Netanyahu had their second phone call in less than 24 hours at this point.

But we're hearing very clearly from Israel that they will continue to strike against Hezbollah in Lebanon. In fact, we have seen just in the past

couple of hours that there have been strikes, according to state media, that Israel has carried out. The Israeli military also saying that

Hezbollah has been firing projectiles, they have intercepted some others, they say, have struck close to IDF forces in southern Lebanon.

So, it's very much a pause in this escalation that we are seeing at this point, it's uncertain though how it will progress over the next couple of

days, given both sides really are digging in when it comes to what they want to do with Lebanon.

ANDERSON: Lebanon, you know, key in all of this. What's been the response there?

HANCOCKS: Iran has made this key in all of this. They have insisted that this is going to be part and parcel of their U.S.-Iran deal. It's not what

Lebanon wants. We've heard from the president, for example. He has said he doesn't want this to be the case, that that Lebanon has effectively become

a bargaining chip, is the way that he said it in an interview with CNN.

And certainly, we understand that this is not what the U.S. President wants either. He has expressed a tremendous amount of frustration at the Israeli

Prime Minister when it comes to what is happening in southern Lebanon. We know last week that he had convinced Prime Minister Netanyahu to pull back

from striking against Beirut, now, of course, that did happen on Sunday, and we saw this escalation in tensions, and we know that Israel doesn't

want it to be tied either, because Israel believes that it has more to do to try and strike against Hezbollah in Lebanon and in southern Lebanon.

They have been consistently saying that they are pushing further into the country.

[10:05:09]

But as it stands, Tehran has managed to link these two issues, and has made it very clear that if there is not peace in Lebanon, then there will not be

a U.S.-Iran deal.

So, certainly, what we're seeing from Tehran's point of view is that if there is no ceasefire there, then President Trump's desire to see this deal

simply will not go ahead.

ANDERSON: Good to have you, Paula. Thank you.

Yaakov Katz is the co-founder of the Middle East America Dialogue Policy Forum, he's a senior columnist for the Jerusalem Post, a regular on the

shows that I anchor. I appreciate his insight and his analysis. He joins us from Tel Aviv after what I know has been a pretty exhausting evening in and

out of shelters when these alarms have been going off, and it's been worse in other parts of Israel, of course. A barrage of attacks from Iran

overnight and into the wee hours. Your assessment of where we are at.

YAAKOV KATZ, CO-FOUNDER, MIDDLE EAST AMERICA DIALOGUE: Well, I think Becky, where we're at right now, is that both sides have basically said we're

willing to stop, we're willing to adhere to President Trump's request that everybody seize the fire, and let's see if we can get back to the

negotiating table on extending that ceasefire, where the Americans and the Iranians were prior to this recent escalation.

But the big question is just what you were talking about now with Paula, is what happens with Lebanon. The Iranians have said if Lebanon is still

attacked by Israel, we will continue to retaliate, and Israel is saying we will continue to defend ourselves and to take down and to attack Hezbollah.

So, that will continue to be the sticky point here, and we know that Trump wants to keep moving towards that ceasefire, but Israel will not be able to

stand by if it continues to get attacked by Lebanon by Hezbollah.

ANDERSON: What is the Israeli prime minister's calculus at this point?

KATZ: I think his calculus is twofold. On the one hand, we can't ignore the fact that, of course, there are elections that are coming up, and he can't

appear to look weak, and he can't appear to be leading a country that is a client state to the United States, and basically does whatever the

president tells him to do.

But I put that aside, really, at the substance of it, Becky, is this issue that it is not simple, we have a terrorist organization in Lebanon that

continues to attack Israel almost every day. There are reports of another Israeli soldier who is being killed from those FPVs, from those drones that

Hezbollah is using with great effectiveness against the Israeli troops are in southern Lebanon and along the border.

At the same time, that's unresolved. At the same time, you have Iran, which even after the 40-year plus day war between Israel and the United States

and Iran, they're still there. The regime is intact, they're rebuilding, they've yet to give up the high enriched uranium, they've yet to give up

the right to enrich uranium, and there's no deal.

So, when Netanyahu looks at the entire region and he looks at all these different fronts, what he sees right now are unresolved conflicts, are

conflicts that he has yet to achieve any of the victories that he promised to the Israeli public after October 7th, after that Hamas massacre that set

us on this course of all these wars.

And therefore, I think what Israel needs is some sort of resolution that it can say two things: number one, we are safer and more secure than we were

before, and number two, we have won, and those are two very difficult objectives to achieve right now when you put all of the different

calculations into the mix. How do you defeat Hezbollah? How do you get to deal with Iran? How do you get out the uranium? All of this together,

extremely complicated.

ANDERSON: So, Yaakov, Naftali Bennett, you know, standing in opposition to the Prime Minister in the next elections, and a former Prime Minister

himself posted this this morning. "This is a moment of truth. We'll see whether Israel is a sovereign state capable of defending itself."

Listen, Benjamin Netanyahu isn't going to -- isn't going to disagree with him on that, but does he sit between -- and I asked our correspondent in

Jerusalem this very question earlier, does the Israeli prime minister sit between a rock, Donald Trump, at this point, and a hard place, domestic

pressure to continue this fight, not least against Hezbollah, if not Iran?

KATZ: Well, it's easy for Naftali Bennett to sit on the sidelines right now, Becky, and criticize because he's not in the chair, and while we have

criticism of Netanyahu, and definitely I do as well. The issue here is he is stuck between that rock and a hard place, because if Trump says don't

you dare do whatever you're going to do, and he defies the president, that has serious strategic repercussions for the state of Israel, military aid,

coordination, the way this war was waged back when it launched on February 28th, sharing of intelligence, technology, so much more.

[10:10:30]

But at the same time, Israelis back to what I said before, they feel that we're not getting those victories that we were promised. The Israeli public

feel that these wars don't end, and that's something that Netanyahu can't necessarily deliver on right now, because there isn't an easy win or an

easy ending to any of these wars, and that's what puts him really in the country, I would say, at a very difficult dilemma right now.

Do you keep going after Hezbollah, knowing, for example, that you're not going to win the war and you need a deal, or do you keep attacking Iran,

knowing that ultimately either way there's going to be a deal that might not be so good? Whichever way you look, there's going to be a price to pay,

and it's not going to be simple, politically.

ANDERSON: Yes, nor of course does this war end for either the Iranians or very specifically for the Lebanese. There are reports, of course, and we

continue to see reports of Lebanese people killed in attacks by Israel, ostensibly targeted at Hezbollah infrastructure and assets.

The Lebanese President spoke to my colleague Christiane Amanpour just late last week. I'm sure you will have heard this interview for the benefit of

those who are watching who haven't. Just let's have a listen to part of that.

(BEGIN VIDEO CLIP)

JOSEPH AOUN, LEBANESE PRESIDENT: Our people being killed, our people being, our houses being destroyed. They are using Lebanon as a bargaining chip in

their negotiation with the United States. It's unacceptable.

(END VIDEO CLIP)

ANDERSON: That was very specifically a message to Tehran. During that interview, he also sent a message to Israel. He said it is time for the

power of reason to prevail over the reason of power. Military activities, nor a military solution, he said, will ever provide you, Israel, with

security and safety to the people of the North.

What do you make of the position of the Lebanese president at present, the Prime Minister, those involved in talks with Israel about a solution to

this? There is a current truce ostensibly in place at this point. It's a twin track, as far as the U.S. is concerned. It is very specifically

Lebanon as a date line intrinsically involved as far as Tehran is concerned in the wider sort of conflict.

KATZ: Yes, but I mean, Becky, you've been someone who's really covered this region so closely for so many years, and you know, just like I do, that if

we had spoken a couple years ago, and said one day there's going to be negotiations, direct negotiations between Israel and the Lebanese

government, while Hezbollah is still there, while Hezbollah is attacking Israel. There's still an Israel's attacking Lebanon. The Israeli ambassador

and the Lebanese ambassador are going to meet together with Marco Rubio, already four or five times in Washington.

It's something that would have been hard to imagine, but there is a government today in Lebanon. I think this is what makes this problem even

greater, is everyone recognizes here in Israel. When I talk to officials in government, they recognize that there is a government in Lebanon that is

the best it's ever going to get for Israel. A government that really wants to free its country of Hezbollah, wants to get rid of Hezbollah. You heard

you just played that bit of President Aoun talking about Iran, who would have thought that one day a President of Lebanon would speak that way. And

we have a real chance.

The problem here, though, Becky, is that the government of Lebanon can't really do much against Hezbollah, and that's why, as much as we might want

to make a deal with the government of Lebanon, will that be applied to Hezbollah? Will Hezbollah adhere to that, or will Israel have to continue

to attack Hezbollah and exchange fire? And that's what makes the political resolution not something that might necessarily be effective for the

military problem that we continue to face.

ANDERSON: Yes, and I agree, you're absolutely right. I mean, the idea of us having this conversation at all two years ago is almost sort of

unthinkable.

What is also unthinkable is that the world, those who are negotiating this deal in Washington, think that it is realistic to ask the government of

Lebanon to defend itself, its sovereignty without the resources and the capability that it currently doesn't have for the Lebanese armed forces.

There's a lot going on here, and I think you know, I think the headline is, you're right, absolutely. You know what is -- what lies, but beyond that

headline is important to pick apart and analyze, and you and I will do that in the days and weeks ahead.

[10:15:14]

It's really good to have you, Yaakov. Always appreciate it. Thank you very much indeed for joining us.

Well, CNN is on the ground in Iran. Let's get the very latest from our Frederik Pleitgen who joins us live from the capital. We should note, CNN

operates in Iran only with the permission of the government there, but we do maintain full editorial control of our reporting. Fred on the ground

with his team.

Good to have you, Fred. Thank you. What are you hearing from Iranian officials?

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Hi there, Becky. Well, certainly today was definitely a pretty dangerous day here in Tehran,

where things really saw the danger of possibly escalating into another full-on war between the United States, between -- I'm sorry, between Iran

and Israel.

We were woken, I would say, around 5:00 a.m. and about 4:45 a.m. local time, that apparently the first strikes happened here in the Iranian

capital in Tehran, but then also in other Iranian cities as well. The first reports that we were getting was that Tehran, specifically the western part

of Tehran, apparently had been hit, possibly also the Mehrabad Airport, which is sort of an airport here within the city limits of the Iranian

capital, but then also Isfahan, which of course is a major industrial center, and then Tabriz in the north as well.

And the Iranians certainly didn't waste any time with their retaliation. It's one of the things that we had been hearing from Tehran over the past

couple of days was that if Israel were to retaliate after the Iranians, of course, targeted Israel last night with ballistic missiles, that then the

Iranians would be ready for what they call a crushing response against Israel, and they started launching ballistic missiles very quickly.

The Iranians saying that there were several waves of those ballistic missiles, some of them targeting Israeli military bases, specifically the

radar installations affiliated with those military bases.

And then there was also one situation where the Israelis hit, and this was confirmed by both Israel and the Iranians, a petrochemical facility in the

south of Iran, and the Iranians said they responded with ballistic missiles of their own.

So, it was really only until the afternoon hours that the Iranians then announced that their military operations were being halted, however, they

do warn, and this is certainly something you still feel here in Tehran, that they could resume at any point in time, specifically if the Israelis

continue their military operations in Lebanon.

So, certainly, the situation I would say right now still very tense, obviously, politically and militarily, before the moment, certainly things

have calmed down to a good degree compared to where we were a couple of hours ago, Becky.

ANDERSON: Israel struck Lebanon again after it said it will suspend military operations.

I just wonder, from the conversations you're having there with officials, where is the pain threshold here? How far can or might Israel push Iran on

Lebanon?

PLEITGEN: That's a very good question, and certainly one of the things that we've heard here is also sort of a change, if you will, in what the

Iranians have been saying.

If you look at about 24 hours ago, the Iranians were saying the threshold for them was Israeli strikes in the Lebanese capital in Beirut. They said

that for -- that for them, that was the red line. And if you look at about 24 hours ago, almost exactly, the Israelis obviously hit a suburb of

Beirut, and the Iranians immediately said that for them a red line had been crossed, and they answered that with those ballistic missile attacks

against those -- against that air base in Israel last night.

The Iranians now saying that if these military operations against Lebanon continue, and specifically also if they escalate, that then the Iranians

certainly reserve the right to strike once again.

And, of course, as you've noted, the Israelis apparently since then, have continued their military operations in the south of Lebanon, and right now

it really is a tense situation, a difficult situation, sort of a gray area where it's unclear at what point the Iranians are going to say that for

them this is too much.

At the same time, the Iranians also saying that they remain committed to that diplomatic process that is still going on with the United States, but

they specifically also say that for them, Lebanon is also part of that process. They say there's only going to be an end to the war and end to the

hostilities with the United States if there is also a cease fire and an end to the hostilities in Lebanon, specifically between Hezbollah and the

Israelis.

So, that's definitely for the Iranians an intrinsic part of that entire calculation, something that they say the United States also needs to be

very much aware of, but then, of course, you also have that myriad of issues between the United States and Iran, from frozen Iranian assets to

Iran's nuclear program, which have also been moved until a time after a first memorandum of understanding between the United States and Iran can be

achieved. That's sort of the next milestone that both sides say they're still committed to trying to achieve. Both sides also say that the going

still is quite tough to try and get there, Becky.

[10:20:22]

ANDERSON: Fred's on the ground in Tehran. Thank you, Fred, to you and the team for your reporting from there.

Ahead on this show, the view from Washington on the latest escalation between Israel and Iran. What some U.S. lawmakers have to say about it is

coming up.

(COMMERCIAL BREAK)

ANDERSON: You're with me, Becky Anderson from Abu Dhabi.

More on our top stories. Sources tell CNN that Israel will say yes to the Trump administration's request to halt its strikes on Iran. It will,

though, continue attacks on southern Lebanon.

Earlier today, Iran said it is calling a halt to its air strikes against Israel. This follows a major escalation of the conflict when Israel

retaliated against Tehran, despite the U.S. president asking Prime Minister Benjamin Netanyahu to hold off.

CNN's Kevin Liptak is at the White House. Jeremy Diamond is in Tel Aviv, as I understand it today. Jeremy, what are we hearing from Israeli officials?

JEREMY DIAMOND, CNN JERUSALEM CORRESPONDENT: Well, just as soon as we heard Iran say that they were halting military operations, but that any further

Israeli strikes on Iran or on southern Lebanon would prompt a resumption of military activity. The Israeli government, through Israeli sources that

we've been speaking to, has given its response, and that is that Israel is also prepared to stop carrying out any further strikes on Iran.

But Israel will not halt attacks on southern Lebanon, and what that is going to result in, very likely, is that if Iran carries out its threat

here, then that's going to mean that we are going to see a resumption of the back and forth between Israel and Iran, which has already seen multiple

waves of ballistic missiles from Iran fired at Israel and Israeli strikes inside of Iran targeting Iranian military sites, as well as a petrochemical

facility.

And so, while we are in a low right now, we haven't had any Iranian missiles here since this morning, it does seem like if Israeli military

actions continue in Lebanon, as indeed they are, and as sources are telling us they will, and it seems like Iran is likely to fire back at Israel once

again. So, this whole region, once again, at a standstill, Becky.

ANDERSON: All right, Kevin, let's get to your perspective there at the White House, if you will.

KEVIN LIPTAK, CNN SENIOR WHITE HOUSE REPORTER: Yes, officials, I think, are breathing something of a sigh of relief, given that both sides are

suggesting they are attempting to de-escalate this sort of 24 hour tit for tat.

[10:25:03]

But at the same time, you know, officials I've been speaking with are very clear that this is a fragile moment, and they do say it lends urgency to

try and get these negotiations back on track with Iran.

You know, we've been hearing from President Trump now for two weeks that they're in the final stages of the discussions. He said the same thing this

morning, but so far no plan has materialized, and the recognition here at the White House is that the longer these discussions go on, the longer the

two sides haggle over words and sentences, the greater the likelihood that something like this completely upends everything, starts the war back

again, and puts President Trump in an even worse political situation that he already was in.

And so, there is now, I think, a heightened urgency to get those discussions back on track.

I think there is also a recognition here that Israel and the U.S. have now completely diverged in what they see. The point of this conflict is,

Benjamin Netanyahu, obviously under political pressure of his own to go after Hezbollah in southern Lebanon, that is at odds with the political

impulses of President Trump, who is trying to get this war concluded as quickly as possible.

And so, I think, you know, there is a realization that they're in a very delicate political moment here. How all of it is resolved at this point

seems to be trying to get this deal finalized, but at this point it's not clear that Iran has yet signed off on all of those red lines that President

Trump insists are part of this plan, Becky.

ANDERSON: It's not clear what that agreement looks like, although it is described by Donald Trump as in its final stages and as a good deal. Kevin,

thank you.

U.S. lawmakers reacting to the latest news out of this region, and I, of course, am in the Gulf region. Democratic Connecticut Senator Chris Murphy

posting, "When Trump announces he is going to call Netanyahu and tell him not to retaliate, and within hours Netanyahu retaliates, the humiliation

just compounds."

On Capitol Hill, U.S. House Democrat Jake Auchincloss tells CNN, America's credibility is on the line.

(BEGIN VIDEO CLIP)

REP. JAKE AUCHINCLOSS (D-MA): Expect this type of on-again, off-again violence and purported negotiations is going to continue for quite a while,

because the president has no control over the situation in the Middle East, and these conversations that are happening between the United States and

Iran about nuclear enrichment, about proxy terror funding, about unfrozen assets, about the Strait of Hormuz from that matter are conversations that

could have and should have been happening before February 28th. This war has accomplished nothing except for making gasoline twice as expensive.

(END VIDEO CLIP)

ANDERSON: It's like Groundhog Day sometimes, isn't it?

Still to come, we are tracking the very latest global fallout from what is the severe disruption and continued disruption of the Strait of Hormuz in

the wake of this current conflict.

(COMMERCIAL BREAK)

[10:30:20]

ANDERSON: Welcome back. You are watching CONNECT THE WORLD with me, Becky Anderson. Your headlines this hour:

A U.S. official is denying Israel's claim that the U.S. intercepted Iranian missiles that were fired overnight. That contradicts an earlier statement

from an Israeli military official.

Iran says it has now halted those aerial attacks after two days of fighting, but warns strikes will resume if Israel continues to target

Hezbollah in Lebanon.

Well, Pope Leo, calls war, a painful defeat of negotiations, in a historic speech at the Spanish parliament. In the first by a pontiff there, he also

spoke on the obligation on countries to resolve their disputes through the peaceful means offered by international law.

This comes as Israel and Iran trade the worst strikes in months.

Well, a deadly earthquake of magnitude 7.8 has struck southern Philippines. Reuters reporting more than two dozen dead. Response teams are mobilizing

to verify more reports of casualties. President Marcos has ordered government agencies to evacuate residents and to start rescue work.

Well, we are an hour into the U.S. trading day now. It was sort of right across the board for Asia, not least in Seoul, but that did not feed into

these U.S. markets. We are seeing gains, some buying back of stocks that dropped off on what was a very weak Friday session.

So, perhaps, no surprise that there has been a bit of a bounce, but you know, investors had been watching these Asian markets and witnessing what

we were reporting and hearing from Iran and Israel overnight. You might have expected these markets to open slightly weaker, given that the oil

price had risen significantly overnight. That is also back down now, despite the fact that commercial shipping through the Strait of Hormuz

remains, well, at a near official standstill, more than a hundred days after the U.S.-Israel-Iran conflict started.

I spoke earlier with the Secretary General of the International Maritime Organization and asked him if the fire -- if the market is really finding

workarounds to these disruption risks. Have a listen to part of what he told me.

(BEGIN VIDEO CLIP)

ARSENIO DOMINGUEZ, SECRETARY-GENERAL, INTERNATIONAL MARITIME ORGANIZATION: We have seen a very reduced number of vessels transiting the Strait of

Hormuz. The month of July, the average was around seven vessels a day that would actually transit.

Of course, this is not in the same circumstances, and not in accordance to the numbers that we were averaging before the crisis of around 130 vessels

a day. The same time, because this is putting the lives of the seafarers at risk, it is not clear for us that it's completely safe to transit across

the Strait of Hormuz. I continue to reiterate my message to all the ship owners and ship operators that we need to wait until it is actually safe to

do so.

We have seen the global impact. The United Nations trade and development of organizations is already stipulating that global trade will reduce from the

estimated 4.7 percent expected for 2026 to around 1.5-2.5. We have seen the prices of oil going up by 40 percent, but the reality is that what we need

is more stability.

(END VIDEO CLIP)

ANDERSON: The U.K. International Maritime Organization has promised support from an international coalition once the risk of conflict in those waters

is reduced. But it's not at present, and so, there is no international coalition there. But there is movement through that strait.

CNN's Matt Egan is in New York. The S.G. there is right to suggest that it is nothing like the pre-war movement. He said, July. I think, he probably

meant May there.

Matt, you have got some reporting on what oil is actually leaving the strait. Tell us more.

MATT EGAN, CNN SENIOR REPORTER: Well, Becky, one of the big surprises is how eerily calm the market has been about this energy crisis. Right, you've

got the Shredder Hoos effectively paralyzed for 100 days now, nightmare scenario. And yet, Brent oil futures are well below $100 a barrel, despite

the fact that the ceasefire looks increasingly shaky.

And so, there is a few theories out there about why prices haven't gone to those dangerous levels that had been warned of.

[10:35:05]

And one of the theories is that, perhaps, the Strait of Hormuz is not as shut down as previously believed. Some analysts believe that there is some

crude that is basically leaking out of this double blockade through the Strait of Hormuz on tankers, tankers that have gone dark by turning off

their transponders.

Now, the visible traffic, what could be tracked through transponders and satellites, that's just a small fraction, right? Basically, about 15

percent of the pre-war levels through the Strait of Hormuz.

However, JPMorgan is estimating that about 2.1 million barrels of what's been described as clandestine oil is flowing through the Strait of Hormuz

each day.

And there is some different estimates out there. Some analysts think it's higher than that, some think it's lower. Some are calling it clandestine

flows, others are calling it ghost transits. But the point is, is that if there is crude that's leaking out through these blockades and it's getting

to the rest of the world that it is perhaps taking some of the pressure off the energy system, helping to absorb this epic shock.

And this is critical, right? Because we know that the Strait of Hormuz is just this absolutely important transit way, where normally you get so much

oil going out to the rest of the market, and it just hasn't been happening because of the war. And this is something that's been difficult to measure.

Now, there is other factors at play here, of course, as well. Right? China has slashed its imports of oil. That's huge. There is also some other

workarounds at play, right? There is the East-West pipeline that's allowed some of the crude in Saudi Arabia to go to the Red Sea and get to the rest

of the world.

But what's interesting is that some of the analysts that I talked to, they are concerned that perhaps the market is underestimating this severity here

of the real-world supply crunch, in part, because of these workarounds, in part, because of the clandestine flows going out of the Strait of Hormuz.

And they are concerned that prices could still go higher.

JPMorgan is saying that even if the Strait of Hormuz reopens this month, they think Brent will average in the third quarter $104 a barrel. $104

average.

And Piper Sandler, they are even more concerned. They see an average of $130 a barrel in the third quarter, all of that would, of course, signal

even higher gasoline prices here in the United States.

But Becky, look, the bottom line is it all depends on what happens, the situation on the ground, right? If the cease fire holds, if they can reach

some sort of a deal to actually really reopen the Strait of Hormuz, then, that would really take some of the pressure off.

If not, and there is more fighting, fighting that perhaps damages energy infrastructure in the region. Then, of course, you could see prices go much

higher from here.

ANDERSON: Good to have you.

EGAN: Thanks, Becky.

ANDERSON: It's a fascinating time, and has to be said, there has to be some rhyme in what feels like the sort of non-reason out there, and your

reporting important for us. Thank you.

Well, Iran's foreign ministry spokesperson says it is absurd that the U.S. might unfreeze Iranian assets to compensate regional allies for war-related

damages.

That comment according to local Iranian media. A source previously told CNN that the U.S. was planning to use Iranian assets to help Gulf countries

that have been impacted by Iranian attacks.

Well, of course, Iran's economy was already battered long before this war began. Decades of sanctions and isolation have taken their toll.

For more, I'm joined by Adnan Mazarei. He is the former Deputy Director of the IMF's Middle East and Central Asia Department.

It's good to have you.

I want to talk about Operation Economic Fury. This was launched by the U.S. Treasury Department, and it is in part an effort to curtail Iranian dark

fleet activities as the U.S. puts a further squeeze, a further and deepened squeeze on Iran and its economy.

This post from Treasury Secretary Scott Bessent: "Iran's economy is floundering, and its military decimated. Through Economic Fury, Treasury

will continue to sever Iran's shadow fleet, shadow banking networks, and access to global trade."

How effective is that operation to your mind, sir? What impact on the Iranian economy?

ADNAN MAZAREI. FORMER DEPUTY DIRECTOR, OF THE IMF'S MIDDLE EAST AND CENTRAL ASIA DEPARTMENT: That operation is affecting. It is leading to a cutback in

Iran's oil exports, financial flows, especially, from the sales of oil, are made more difficult.

Having said that, I don't think the Iranian economy is about to collapse, and I don't think the Iranian government is about to rush to the

negotiation table because of economic problems.

[10:40:14]

Several reasons. One, they are very well adept at dealing with sanctions. Secondly, they are working around in some ways, for example, while the flow

of oil through the Persian Gulf is being curtailed, they are selling oil and transporting it on land, by land routes, through, for example, Central

Asia and to Turkey.

Also, they are cutting back the domestic use of oil -- gas, and exporting it more.

Life is very difficult in Iran. Also, this government is -- has a high tolerance for the population's economic difficulties. So, they will not

hurt themselves as much as you one may think, and they are not about to rush to the negotiation table because the people are suffering so much.

ANDERSON: I want to just get you some sound from an interview that my colleague Fred Pleitgen conducted with the Iranian Foreign Ministry

spokesperson just over the weekend. He spoke exclusively to Fred and the CNN team. This is what he had to say about sanctions.

(BEGIN VIDEO CLIP)

ESMAIL BAGHAEI, SPOKESPERSON, IRANIAN FOREIGN MINISTERY: When they are talking about our blocked assets, they are not going to give us any

concession. They simply must stop their sanctions. They have to learn not to talk to Iranians like the way they have been used to.

(END VIDEO CLIP)

ANDERSON: I just wondered if you had a brief reaction to that.

MAZAREI: Well, on the one level, the foreign ministry person is discussing the discourse between the U.S. and Iran, and how you speak affects things.

The second issue is the matter of the freezing -- unfreezing of Iranian assets. Iranian assets abroad that have been frozen. Estimate -- are

estimated to be up to like a $100 billion and thus far, the U.S. administration has been unwilling to release any of it until a much more

final agreement is reached.

ANDERSON: The regime may be less exposed to domestic pressures than, for example, Donald Trump, who has to keep one eye on what's going on in the

markets, one eye on what is going on with gas prices, for example, ahead of the summer travel season and the Midterms. And we've talked about that, and

we have talked at length about whether the U.S. has, you know, basically sort of misread just how much pain the regime can take when it comes to the

economy.

What about the regular sort of Iranian man and woman on the street, just trying to get by like everybody else? How does an economy crippled by war

and sanctions affect the daily lives of people there? And how long can they cope?

MAZAREI: Look, the Iranian population is suffering tremendously. Let me just give you a couple of numbers. The inflation rate now is at 58 percent.

That is the highest rate of inflation in Iran since World War II.

Food price inflation is more than 110 percent. The population is suffering very badly. The poverty rate is about one-third of the population, and it's

going to get far worse. So far, the regime has put down any form of public outcry with brutality at times, but sooner than later, these issues will

translate into a political force that the Iranian government has asked to contend with.

ANDERSON: Sooner or later is what I hear from, you know, American sources that I speak to, from sources around this region. It does so seem as if it

is the Iranian people who will continue to suffer as this continues to be unresolved.

[10:45:04]

Donald Trump says he has a deal, which is in the final stages. A good deal as he describes it. We will continue to monitor the situation both

militarily and diplomatically.

It's good to have you, sir. Thank you very much indeed.

Well, ahead on CONNECT THE WORLD, Pope Leo makes an impassioned call for peace in Spain. A live report from Madrid is next.

(COMMERCIAL BREAK)

ANDERSON: Pope Leo has described war as a painful defeat of negotiations, as the conflict between Israel and Iran continues. The pontiff is in Spain,

addressing politicians at the country's parliament. There, he insisted states should resolve their disputes through the peaceful means offered by

international law.

Pau Mosquera, joining us from Madrid. What more was said in his speech to the Spanish Parliament, Pau?

PAU MOSQUERA, CNN CORRESPONDENT: Well, Becky, during his speech, Pope Leo has covered a wide range of topics, all of them, somehow related to human

dignity.

Starting, for example, with political polarization, something that has been very present in the debates that have taken place in that chamber over the

past few years, as well as in other countries. But also spoke about the difficult situation of the thousands of migrants that have to face

discrimination on a daily basis.

Regarding the political message, he urged Spanish lawmakers and other leaders around the world to not let these political differences to be

turned into a constant confrontation. Instead, he urged for the necessity, the need to recover the culture of dialog and mutual respect. Take a

listen.

(BEGIN VIDEO CLIP)

POPE LEO XIV, SOVEREIGN OF THE VATICAN CITY STATE (through translator): The world is undergoing a profound spiritual and cultural crisis, manifested in

multiple forms of violence, polarization, and mutual distrust.

Weapons can impose a temporary silence, but they can never build an authentic and lasting peace.

(END VIDEO CLIP)

MOSQUERA: He also appealed for a compassionate approach to migrants, asking all the leaders that were present in the Spanish parliament to welcome them

with dignity and respect.

That was quite a historic moment, Becky, because this was the very first time that a pontiff was able to deliver a speech in front of the members of

the parliament.

Later, after finishing his intervention in that chamber, he directly traveled to the headquarters of the Spanish Episcopal Conference, where he

met the Spanish bishops. There, he addressed the situation of the different cases of sexual abuse that have been committed within the church, which

described as a scourge.

Now he urged all the presents to receive and help the victims with listening with truth, but above all, with reparation.

[10:50:08]

Now, Becky, in a matter of an hour or so, we are waiting for Pope Leo XIV to get here to the Almudena Cathedral, that you can see behind me, because

here is where he will lead a service in honor of Our Lady of Almudena. Becky.

ANDERSON: Good to have you, Pau. Thank you.

In Albania, thousands of people have been protesting for seven days in a row now, against a new development linked to President Donald Trump's son-

in-law, Jared Kushner. The planned resort would be on a virtually untouched island in the Adriatic Sea, near a protected wetland that is home to

thousands of flamingos and other protected birds.

Protesters have been chanting Rama in prison outside of the Prime Minister's Office, while demanding transparency about the rumored $1

billion development. Other protesters demanding more details about how the project will affect local people.

These demonstrations began after Donald Trump's daughter, Ivanka, spoke about how she and Kushner found the island and decided to develop it.

(BEGIN VIDEO CLIP)

IVANKA TRUMP, DAUGHTER AND ADVISER TO PRESIDENT DONALD TRUMP: We were on a friend's boat, and we stopped for a swim. Effectively, that's how we found

it.

We swam to the islands, we went on a hike barefoot all the way up to the top, and we were just captivated, and it stayed with us ever since.

(END VIDEO CLIP)

ANDERSON: Well, even as tensions between Iran and Israel flare again, golf business isn't standing still.

Still ahead, we hear from the CEO of Qatar Airways about why he remains bullish on the region's economic future. That's more after this.

(COMMERCIAL BREAK)

ANDERSON: Latest escalation between Iran and Israel, a reminder of just how fragile this ceasefire in this region remains. Even as tensions flare,

though, Gulf states are continuing to push for diplomacy. Qatar's Foreign Ministry says the Qatari and Iranian foreign ministers spoke by phone,

reviewing efforts to mediate between Washington and Tehran."

And while security concerns continue, the region's economies are showing remarkable resilience.

Etihad CEO Antonoaldo Neves, told the Financial Times, Abu Dhabi's Etihad Airways is on track to surpass its pre-Iran war capacity within weeks

without the need for price cuts at the IATA annual conference in Brazil.

My colleague, Richard Quest spoke to the CEO of Qatar Airways about the outlook for travel and business across the region. This in part is what he

said.

(BEGIN VIDEO CLIP)

HAMAD ALI AL-KHATER, CHIEF EXECUTIVE OFFICER, QATAR AIRWAYS: Let me put this into perspective. The skies are open for Qatar Airways, but the strait

remains closed for now. So, we are provisioning, we -- you know, we fly to about -- we have of about 166 destinations.

We have mapped out all of our out stations and airports, we believe there is high risk, we believe there is sufficient headway from a proper critical

fuel supply shortages. Having said that, we're looking after the health of the business, so we are provisioned accordingly, and resilience and

emergency and planning was just a core paramount factor in how we operate in the months to come.

RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Do you think you are going to have any fuel issues? And then, the second related point, of course, is the cost

of putting up ticket prices to pay for the extra fuel.

[10:55:04]

Everybody is doing it, that will hit demand.

AL-KHATER: We have seen demand bounce back at a pretty surprising level. What we expected was a U-shape recovery, is coming closer to a V-shape

right now.

Loads just five days ago, crossed north of 80 percent Australia to Europe, the kangaroo route is bouncing back. India-U.S. flows are bouncing back.

China, Africa, we are seeing some pretty robust and resilient demand in the outset.

Yes, fuel price is a risk. Yes, we have to pivot and steer accordingly from a -- from a -- from a price perspective to see what's appropriate for our

passengers. But the loads speak for themselves.

(END VIDEO CLIP)

ANDERSON: The CEO of Qatar Airways, and watch that full interview with Richard on "QUEST MEANS BUSINESS" on CNN International at 4:00 p.m. Eastern

Time.

Well, that is it for CONNECT THE WORLD, with me, Becky Anderson.

From the team working with me across these hours today, it is a very good evening from Abu Dhabi. Stay with CNN. The "ONE WORLD" is up next.

(COMMERCIAL BREAK)

END