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President Donald Trump had urged restraint after the two countries intensified attacks, and Iran said it would halt its strikes.
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Markets in Asia are hit by a tech sell-off, and oil is volatile as Iran and Israel launch attacks on each other.
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The power struggle between Iran and Israel to define the new rules of the Middle East plays out in Lebanon, which the other two countries have used to pursue their own ends.
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Iran said its attacks were "the beginning of a full week of continuous strikes."
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President Trump has voiced his frustration with Prime Minister Benjamin Netanyahu of Israel, but it is not clear how able he is to rein in Israeli military action.
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The Yemeni militia group, which is backed by Iran, said it would impose a partial blockade in the waterway, a move that would further strangle supply routes and aggravate the conflict in the Mideast.
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President Donald Trump announced "major combat operations" against Iran on Feb. 28, with massive joint U.S.-Israeli strikes.
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As Trump fumes over fighting that has impeded his peace talks with Iran, some Israelis recall the 18-year occupation of Lebanon that began in 1982 and cite "complete déjà vu."
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As explosions sounded in the Iranian capital, people frantically checked phones and social media to see whether they were under attack again.
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Israel and Iran traded fire early Monday in retaliatory strikes that threatened to drag the wider Middle East back into a regional war.
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Iran and Israel striking each other threatens the fragile ceasefire between the U.S. and Iran has been in place since early April.
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The exchange, after Tehran's first such strike on Israel in two months, threatened to further complicate efforts to broker a peace deal aimed at ending the war.
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The strikes come days after a ceasefire agreement in Washington. Iran had warned that an attack on Beirut would renew full-scale war across the Mideast. Iran's powerful parliament speaker hints at retaliation.
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Israel's military said that it struck Iranian military targets in the western and central parts of the country. NBC News' Courtney Kube reports.
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Israeli airstrikes on southern Lebanon on Saturday killed nine people, including three Lebanese military members, according to the Lebanese army and state media.
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