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Iran Update Special Report, July 3, 2026
The Institute for the Study of War (ISW) and The Critical Threats Project (CTP) at the American Enterprise Institute are publishing daily updates to provide analysis on the war with Iran. The updates cover events from the past 24-hour period.
Key Takeaways
Iran continues to insist on imposing an illegal toll scheme in the Strait of Hormuz despite Omani opposition to mandatory fees. The US-Iran memorandum of understanding (MoU) requires Iran to engage with Oman to determine the “future administration” of the strait, but recent reports indicate that Iran and Oman have different visions for the future management of the waterway.
Iranian officials appear to be trying to rally support for Iranian management of the strait by touting the alleged economic and security benefits of such management for regional countries. Iranian management of the strait would be detrimental to global commercial interests by enabling Iran to disrupt global trade and energy flows at will, however.
Iranian Supreme Leader Mojtaba Khamenei did not make a public appearance at the opening ceremony for the funeral of former Supreme Leader Ali Khamenei in Tehran on July 3, despite the attendance of most of Iran’s senior leadership and many foreign dignitaries.
Toplines
Iran continues to insist on imposing an illegal toll scheme in the Strait of Hormuz despite Omani opposition to mandatory fees. Iran reportedly rejected an Omani proposal to create a fund for “maritime services” that would be financed by voluntary donations from shipping and energy companies, according to people familiar with the discussions speaking to the Wall Street Journal on July 2.[1] The New York Times, citing an Iranian official, similarly reported on June 30 that Iran seeks to impose mandatory fees on vessels that transit through the strait.[2] A regional diplomat told the New York Times that Oman suggested making the fees voluntary, in contrast.[3] The US-Iran memorandum of understanding (MoU) requires Iran to engage with Oman to determine the “future administration” of the strait, but these reports indicate that Iran and Oman have different visions for the future management of the waterway.[4] Other Gulf states, with which Iran is also required to engage under the MoU, have similarly expressed opposition to Iranian control of the strait.[5] Iranian Parliament Speaker Mohammad Bagher Ghalibaf separately claimed that Iran and Oman’s management of the strait is “in accordance with international law,” but any Iranian management of the strait in which Iran charged tolls would violate the United Nations Convention on the Law of the Sea (UNCLOS), which forbids states bordering international waterways from restricting transit passage or imposing transit charges.[6]
Iranian officials also appear to be trying to rally support for Iranian management of the strait by touting the alleged economic and security benefits of such management for regional countries. Iranian management of the strait would be detrimental to global commercial interests by enabling Iran to disrupt global trade and energy flows at will, however. Ghalibaf told his Uzbek counterpart on July 3 that Iranian control over the strait will bring “better opportunities” for the “development of transit cooperation” between Iran and Uzbekistan and reduce US interference in the region.[7] Ghalibaf’s comment comes as Iranian officials have recently called on regional countries to support a new “regional security mechanism” that Iran likely envisions would include Iranian control over the Strait of Hormuz and the removal of US forces from the Middle East.[8]
Iranian Supreme Leader Mojtaba Khamenei did not make a public appearance at the opening ceremony for the funeral of former Supreme Leader Ali Khamenei in Tehran on July 3, despite the attendance of most of Iran’s senior leadership and many foreign dignitaries.[9] Mojtaba has not been seen publicly since the war began and is reportedly recovering from injuries sustained in the strike that killed his father.[10] Key decision-maker and Islamic Revolutionary Guards Corps (IRGC) Commander Major General Ahmad Vahidi also made his first public appearance since the US-Israel-Iran War at the ceremony.[11]
US-Iran Negotiations
Iran continues to exploit the ceasefire and memorandum of understanding (MoU) to try to replenish its economic resources and rebuild its defense capabilities in preparation for potential future conflict with the United States and Israel. Iran has begun talks with Japanese companies to buy Iranian oil, according to Iranian and Western sources speaking to Reuters on July 3.[12] The US-Iran MoU includes a 60-day oil sanctions waiver and states that the United States will lift all sanctions on Iran upon the signing of a final agreement. Japan was previously a large importer of Iranian oil prior to the imposition of US maximum pressure sanctions on Iran in 2018.[13] Iran’s talks with Japan suggest that Iran is attempting to use the sanctions waiver to rebuild its oil sales network with former economic partners. Iran separately appears to be using this period to fortify tunnel entrances at nuclear sites against potential future airstrikes or ground operations targeting these sites.[14] Iranian construction vehicles have been operating at the western tunnel entrances of the Kolang Gaz La Mountain site, according to the Institute for Science and International Security’s July 2 analysis of commercially available satellite imagery between June 21 and 30.[15] Iranian officials, including Qom Friday Prayer Leader Mohammad Saeedi, have also explicitly stated that Iran is using this period to reconstitute its defense capabilities.[16] Saeedi also expressed doubts about the US-Iran negotiations and stated that Iran will not compromise on its demands.[17] This recent Iranian activity is consistent with ISW-CTP’s ongoing assessment that the status quo–in which Iran is benefiting from economic relief from the MoU but has not had to make concessions on its nuclear program–is favorable for Iran. Iran’s acquisition of economic relief also strips the United States of leverage in later negotiations about Iran’s nuclear program.[18]
Maritime Activity in the Strait of Hormuz and Persian Gulf
See topline section.
US and Israeli Air Campaign
Nothing significant to report.
Iranian Domestic Affairs
See topline section.
Iran’s Axis of Resistance
Lebanese Hezbollah and the Israeli Campaign in Lebanon
The Israel Defense Forces (IDF) and Hezbollah continued to engage each other in southern Lebanon on July 1 and 2.[19] The IDF reported that a Hezbollah fighter injured three IDF reservists in a small arms engagement in Bint Jbeil, Nabatieh Governorate, on July 1.[20] The IDF reported that it struck 10 Hezbollah sites near the towns of Bint Jbeil, Beit Yahoun, Kounin, and Baraachit in Nabatieh Governorate in response on July 2.[21] The IDF also reported on July 2 that it struck a Hezbollah vehicle that Hezbollah fighters were using to transport weapons and explosives near the IDF’s security zone in southern Lebanon.[22] The IDF stated that the strike detonated the explosives inside the vehicle, causing a secondary blast.[23] Lebanese media reported on July 2 that the IDF also struck an unspecified target near Seddiqine, South Governorate.[24]
Other Axis of Resistance Activity
IRGC Quds Force-affiliated Mahan Air has resumed direct flights between Tehran and Houthi-controlled Sanaa, Yemen, for the first time in over 10 years, according to commercially available flight data.[25] Commercially available flight data shows that a Mahan Air plane flew from Tehran to Sanaa on July 3 and returned to Tehran a few hours later.[26] An Israeli military correspondent reported on July 3 that the flight was transporting senior Houthi officials to former Iranian Supreme Leader Ali Khamenei’s funeral ceremony in Tehran.[27] Iranian media and a US-based Yemen analyst reported on July 3 that the Mahan Air flight was the first direct flight between Iran and Yemen in over 10 years.[28] Mahan Air is a US-sanctioned Iranian airline that has frequently transported Quds Force funds, weapons, and operatives to support Iranian regional activities.[29] Houthi military spokesperson Yahya Sarea claimed that Saudi aircraft attempted to prevent the Mahan Air flight from landing in Sanaa, but that Houthi air defenses forced the Saudi aircraft to withdraw.[30] ISW-CTP has not observed any evidence that this incident took place at the time of this writing. Sarea warned Saudi Arabia that the Houthis would retaliate against any future Saudi “airspace violations” with strikes on Saudi airports and other “vital interests on land and sea.”[31]
Endnotes
[1] https://www.wsj.com/world/middle-east/u-s-dangles-rewards-for-opening-the-strait-of-hormuz-iran-isnt-budging-07d99135 [2] https://understandingwar.org/research/middle-east/iran-update-special-report-june-30-2026/; https://www.nytimes.com/2026/06/30/world/middleeast/iran-war-oman-strait-hormuz-fee-ships.html
[3] https://understandingwar.org/research/middle-east/iran-update-special-report-june-30-2026/; https://www.nytimes.com/2026/06/30/world/middleeast/iran-war-oman-strait-hormuz-fee-ships.html [4] https://www.bbc.com/news/articles/c4gy700j0eko [5] https://www.wsj.com/world/middle-east/u-s-dangles-rewards-for-opening-the-strait-of-hormuz-iran-isnt-budging-07d99135 [6] https://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf [7] https://t.me/Tasnimnews/427920 [8] https://understandingwar.org/research/middle-east/iran-update-special-report-june-30-2026/ [9] https://t.me/farsna/446236; https://t.me/farsna/446279 [10] https://www.theguardian.com/world/2026/mar/11/mojtaba-khamenei-was-hurt-in-strike-that-killed-his-father-irans-cyprus-ambassador-confirms; https://www.nbcnews.com/world/iran/powerful-iranian-general-seen-public-preparation-supreme-leaders-vast-rcna352842 [11] https://x.com/GhonchehAzad/status/2073031913997041734?s=20 [12] https://www.reuters.com/business/energy/iran-exploring-oil-sales-japan-buyers-seek-longer-sanctions-waiver-sources-2026-07-03/ [13] https://www.reuters.com/business/energy/iran-exploring-oil-sales-japan-buyers-seek-longer-sanctions-waiver-sources-2026-07-03/ [14] https://x.com/TheGoodISIS/status/2072755799810592818 [15] https://x.com/TheGoodISIS/status/2072755799810592818 [16] https://www.iribnews dot ir/fa/news/5843306; https://www.wsj.com/world/middle-east/the-iranian-enforcer-driving-tehrans-hard-bargaining-with-the-u-s-b848e67c; https://t.me/farsna/440701 [17] https://www.iribnews dot ir/fa/news/5843306 [18] https://understandingwar.org/research/middle-east/iran-update-special-report-june-21-2026/ [19]https://x.com/idfonline/status/2072877367731642549; https://x.com/manniefabian/status/2072910157143552038 ; https://t.me/moriahdoron/32153 [20] https://x.com/idfonline/status/2072877367731642549; https://x.com/manniefabian/status/2072910157143552038 ; https://t.me/moriahdoron/32153 [21]https://x.com/idfonline/status/2072999366642581967 ; https://x.com/manniefabian/status/2073006486846931000 [22] https://x.com/idfonline/status/2072999366642581967 ; https://x.com/manniefabian/status/2073006486846931000 [23] https://x.com/idfonline/status/2072999366642581967 ; https://x.com/manniefabian/status/2073006486846931000 [24] https://x.com/MarioLeb79/status/2072810921953722604 [25] https://www.flightaware.com/live/flight/IRM1199 ; https://www.flightradar24.com/data/flights/w51198 [26] https://www.flightaware.com/live/flight/IRM1199 ; https://www.flightradar24.com/data/flights/w51198 [27] https://x.com/ItayBlumental/status/2073065333821202709 [28] https://x.com/BashaReport/status/2073022189507363156 ; https://t.me/Nournews_ir/369738 [29] https://home.treasury.gov/news/press-releases/sm1098 [30] https://x.com/MMY1444/status/2073059712485179809 [31] https://x.com/MMY1444/status/2073059712485179809
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