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(Bloomberg) — Israeli Prime Minister Benjamin Netanyahu asserted the country is free to act as it chooses in a counter-strike against Iran after a report suggesting his government is heeding US pleas to keep nuclear and energy facilities off its target list to limit the risk of escalation.

“We listen to the opinions of the United States, but we will make our final decisions based on our national interests,” Netanyahu’s office said Tuesday.

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Israel and the US have been conferring regularly on how to retaliate for Iran’s Oct. 1 ballistic-missile salvo, a dilemma that’s jangled nerves across the Middle East and in energy markets. The debate has tested the relationship between Netanyahu and US President Joe Biden, who has sought unsuccessfully to secure a cease-fire in the country’s conflicts with Iran-backed Hamas in Gaza and Hezbollah in Lebanon. 

A report in the Washington Post said the Israeli premier had agreed to limit the response to military targets. The newspaper cited two officials familiar with the matter who it didn’t identify. 

In a show of continued US support, Israel has received initial components of a US-supplied and operated missile shield known as THAAD as well as an advance team of an eventual 100 American soldiers needed to operate it, according to the Pentagon. That system would help defend against ballistic-missile attacks, although some Israeli analysts have said the deployment may also hinder Israel’s ability to act alone against Iran.

A decision to limit a response to Iranian military targets might not sit well with more hard-line Israelis. “We have an opportunity to cut off the head of the snake,” far-right National Security Minister Itamar Ben-Gvir told Army Radio, in reference to Iran. He declined to give details on closed-door cabinet deliberations.

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A major escalation in Israel-Iran hostilities may engulf the broader region in conflict and have implications for crude prices and the outcome of the US presidential elections on Nov. 5. Oil plunged after the report that Israel may avoid targeting Iran’s crude infrastructure, as traders switched focus to the International Energy Agency’s expectations of a sizable glut early next year.

Israel’s response to the Iranian missile attack will be “precise, painful, and surprising,” Defense Minister Yoav Gallant said Monday, adding that Israel has no interest in  opening additional fronts.

Meanwhile, Israeli tanks and troops are continuing their invasion of southern Lebanon in an attempt to root out Iranian-backed Hezbollah militants, while the air force pummels the country’s interior.

Lebanese authorities said Monday an Israeli airstrike killed 21 people in a remote region with a Christian-majority population, well away from the Hezbollah heartland. 

Israel said it struck Hezbollah and is assessing reports of civilian casualties. At least 1,600 people have been killed since Israel started its air campaign to target Hezbollah in Lebanon nearly a month ago, according to health officials there.

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Hezbollah, which killed four soldiers at an Israeli base with a drone strike on Sunday, is keeping up its attacks. On Tuesday, sirens sounded in and around the northern Israeli port city of Haifa, sending hundreds of thousands of people running to shelters. The Israeli military said about 20 projectiles were launched from Lebanon, though some were shot down.

Hezbollah’s deputy leader, Naim Qasem, said the group will not relent in efforts to target both Israeli military positions and the country as a whole. The group is open to a cease-fire but is “not speaking from a point of weakness,” he said in a televised address, underlining the sense that Hezbollah remains a potent force despite weeks of Israeli airstrikes and the assassination of its leader, Hassan Nasrallah.  

“After a cease-fire and according to an indirect agreement, the residents can go back to the north,” Qasem said, referring to the tens of thousands of Israelis displaced from communities near the Lebanese border. 

Israel has started to see attacks within its borders. Israel Police said one officer was killed and four other people wounded by a gunman on a highway south of Tel Aviv. The incident was classified as terrorism, the police said, adding that the gunman had been shot dead. According to a Hamas-affiliated Palestinian newspaper, the gunman was Mohammed Dardouna, a Gazan who had a work permit in Israel and has been in the country since before the Hamas attack of Oct. 7, 2023.

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While Israel has overrun Hamas in the Palestinian territory of Gaza, it has staged new ground and airstrikes in what it says is an attempt to stop the Islamist militants regrouping. The health ministry in Hamas-run Gaza said 55 people have been killed in the past 24 hours.  

Both Hezbollah and Hamas are designated terrorist groups by the US and other countries.

Iran’s foreign minister has toured regional countries over the past week to urge “a common understanding” on the crisis, according to a statement. Abbas Araghchi visited counterparts in Saudi Arabia, Qatar, Iraq and Oman, as well as meeting with an official from the Yemen-based Houthis and holding a call with China’s Foreign Ministry.

Iran has repeatedly called on Gulf Arab states to cut ties with Israel over the war in Gaza, which has devastated the Palestinian territory after more than a year of fighting. 

The head of the country’s Quds Force, the branch of the Islamic Revolutionary Guard Corps responsible for foreign operations, made his first public appearance in weeks early Tuesday. It followed reports he was in Beirut during an Israeli air strike last month.

—With assistance from Dana Khraiche, Beril Akman, Alisa Odenheimer and Fares Akram.

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