Key Takeaways

• High-intensity hostilities in Lebanon have paused, yet there is a risk of renewed escalation, given the potentially conflictual situation created by the co-existence of the June 17 Memorandum of Understanding between the US and Iran and the Trilateral Framework between Lebanon, Israel, and the US. However, Israel sharply reduced its military activity between June 20 and through July 5, avoiding the deeper strikes that characterized the early stages of the conflict. Hezbollah has so far not fired into Israeli territory but continues to warn that it reserves its right to defend its homeland and people.
• The diplomatic process has ratcheted up domestic political tensions, but a dramatic escalation remains unlikely; Hezbollah rejects the June 26 Trilateral Framework though has stopped short of issuing direct threats to overthrow the government or mobilize protests. Although limited demonstrations and road closures followed the agreement’s announcement, Hezbollah and Amal have framed their responses around preserving civil peace. 
• Syrian Foreign Minister Assaad Shaibani visited Beirut, where he met with senior political and religious leaders. Shaibani signed an agreement establishing a Lebanese-Syrian Joint Higher Committee to advance bilateral cooperation, reiterated a pledge not to interfere in Lebanese internal affairs, and signaled openness to mutually beneficial dialogue with all Lebanese parties, including Hezbollah.
• Justice Minister Adel Nassar referred Al-Qard Al-Hasan – a Hezbollah-affiliated financial institution – to the Public Prosecutor for investigation into its financial activities. The move comes amid intensifying international pressure on Lebanon to combat money laundering and terrorist financing.
• The Consumer Price Index increased by only 0.49% during May, compared to 4.91% and 3.04% in March and April, respectively. The regional ceasefire and reopening of the Strait of Hormuz have stabilized fuel prices and decreased expected inflation. The prices for “Food and non-alcoholic beverages” and “Housing, water, electricity, gas, and other fuels” have decreased.
• The IMF’s Diagnostic of Governance and Corruption report found oversight institutions severely weakened, unable to operate independently due to fragmentation, limited information-sharing, and delayed establishment. The Ministry of Finance acknowledged past governance failures, welcomed IMF recommendations, and attributed reform delays to regional tensions and institutional weaknesses.
• Restoration of essential services in southern Lebanon is progressing incrementally, with road-clearing operations, electricity repairs, and telecommunications work underway across the Sour, Nabatieh, Bint Jbeil, Marjayoun, and western Bekaa districts.
• For the first time, Lebanon’s 2026 general budget allocated funding – USD 50 million – to the “Aman” cash assistance program, marking a shift away from near-total reliance on external donors. The shift signals greater state ownership of safety-net financing.

By Crisis Analytics Team, Mercy Corps Lebanon