Somalia’s South West state said on Tuesday it was suspending all cooperation and relations with the government in Mogadishu, the latest sign of strain in the Horn of Africa country’s fragile federal system.

At a press conference, South West officials accused the federal government of arming militias and trying to unseat the state’s president, Abdiaziz Hassan Mohamed Laftagareen. Somalia’s defense and information ministers did not respond to Reuters’ requests for comment.

Disputes over constitutional changes, elections and the balance of power between Mogadishu and regional administrations repeatedly open up political fault lines in Somalia. The South West administration says relations with Mogadishu worsened after the federal government pushed through constitutional amendments opposed by some state leaders.

Travel agencies told Reuters on Tuesday that commercial flights between Mogadishu and Baidoa, the administrative capital of South West state, had been halted. Humanitarian flights, including for United Nations operations, were continuing. Baidoa, which lies about 245 km (150 miles) northwest of Mogadishu, is a politically and militarily sensitive city because it hosts federal troops, regional security forces and international humanitarian operations in a zone affected by drought, conflict and displacement.

The Mogadishu government’s relations with other states have also been fraught. Somaliland declared independence in 1991 and has long been outside Mogadishu’s control. The administration of semi-autonomous Puntland said in March 2024 it would no longer recognize the federal government until disputed constitutional amendments were approved in a nationwide referendum.

Semi-autonomous Jubbaland suspended ties with Mogadishu in November 2024 in a dispute over regional elections.

i24 News – Iran is showing no indication it is ready to end the war with the United States and Israel, as officials say Tehran is relying on its control over the Strait of Hormuz to increase global economic pressure and strengthen its position.

According to regional officials cited by The Washington Post, Iran is rejecting diplomatic efforts to identify an off-ramp and instead escalating attacks on neighboring countries. An Iranian diplomat said the strategy is to “make this aggression super expensive for the aggressors,” as Tehran faces sustained military pressure.

The Strait of Hormuz remains central to Iran’s calculations. The waterway carries roughly one-fifth of global fuel shipments, and its partial closure has disrupted energy markets. US President Donald Trump issued a 48-hour deadline for Iran to reopen the route, warning of further escalation if it does not comply.

Iranian officials and diplomats said the leadership views its ability to maintain pressure through the strait as a short-term success, even as infrastructure damage mounts. “They don’t feel any pressure to negotiate,” one European diplomat based in the Gulf said, adding that Iran sees its influence over oil markets as a form of leverage.

At the same time, efforts to mediate a ceasefire have so far failed. Officials from Qatar and Oman approached Iran last week, but Tehran said it would only engage if US and Israeli strikes stopped first. An Iranian diplomat said the country would not accept a “premature ceasefire” and is seeking guarantees, including compensation and commitments to prevent future attacks.

The war has already caused significant damage. The Pentagon says more than 15,000 targets have been struck across Iran, while Iranian authorities report over 1,200 civilian deaths. The conflict has also expanded regionally, with Iranian strikes targeting energy infrastructure in Gulf states following attacks on its own facilities.

Despite mounting losses, analysts say Iran’s leadership believes prolonging the conflict could shift pressure onto Washington and its allies through rising energy prices and regional instability. “We’re still on an escalatory path,” said Alan Eyre, a former US official, adding that Tehran is attempting to “up the costs” rather than move toward negotiations.

A Middle East crisis that has convulsed markets should remain the focal point for Wall Street in the near term, as investors stay glued to developments in Iran and the fallout from surging energy prices.

As the US-Israeli war on Iran stretches to three weeks, an over 40% jump in oil prices is driving worries about higher inflation and stagnating economic growth.

Inflationary concerns on Friday were prompting markets to rule out any equity-friendly interest rate cuts this year, which investors previously had been counting on, with futures trading instead suggesting modest chances of hikes in 2026. Federal Reserve Chair Jerome Powell expressed deep uncertainty at the US central bank’s meeting on Wednesday about how the crisis would factor into the economy, muddying its ability to forecast conditions ahead.

US stocks suffered sharp declines to end the week. The benchmark S&P 500 stock index posted its fourth straight weekly decline and hit a six-month low, while the Nasdaq Composite ended down nearly 10% below its October all-time high.

Middle East tensions escalated this week. Iran attacked energy facilities across the region following Israel’s strike on its gas field, while officials told Reuters on Friday that the US military is deploying thousands of Marines to the Middle East.

“This is a situation that’s so fluid,” said Chris Fasciano, chief market strategist at Commonwealth Financial Network. “We could have a resolution in the next week or it could go on for some time. And the longer it goes on, you start to think about the impacts it could have on the US economy.”

WATCHING OIL, STOCKS’ ‘ORDERLY’ REACTION

Swings in crude prices have rippled through asset classes. US crude settled around $98 a barrel on Friday, while Brent ended around $112. In addition to the attacks on energy infrastructure, traffic has stalled in the Strait of Hormuz, through which around a fifth of the world’s crude oil and liquefied natural gas normally passes.

The 20-day correlation between the S&P 500 and US crude stood at -0.89 late on Friday, according to LSEG data, a strong inverse relationship that showed they have tended to move in opposite directions.

“If you’re a trader, you watch oil prices because I do think that that’s generally giving the leading indicator as to how the financial markets are viewing the outlook for the conflict,” said Eric Kuby, chief investment officer at North Star Investment Management Corp.

The S&P 500 energy sector, which includes shares of oil companies, has gained since crude prices began to spike in late February, but the group accounts for less than a 4% weight in the benchmark index.

The latest declines left the S&P 500 down 6.8% from its record closing high set in late January. The pullback has mostly lacked the chaotic quality of the abrupt equity slide last April following President Donald Trump’s “Liberation Day” tariff announcement that set off broad economic worries, Fasciano said.

“This has been fairly orderly, which I think is an encouraging sign,” Fasciano said. “And I think it’s because the underlying fundamentals for corporate America are still fairly robust and are offering some support.”

TREASURY YIELDS, MARKET TECHNICALS ALSO IN FOCUS

Fast-climbing Treasury yields, driven higher by the energy price spike and caution from global central banks, were looming as a risk factor for stocks. The benchmark 10-year Treasury yield was last at 4.38% on Friday, its highest level since last summer.

Keith Lerner, chief investment officer at Truist Advisory Services, said he was watching whether the 10-year Treasury yield sustainably rises above 4.3%, which could increase pressure on stocks, while he was also eyeing 4.5% as a key level.

“Rates going higher means borrowing costs are somewhat higher. And then that could actually slow the economy,” Lerner said. “At some point, if they keep going higher, then the relative attractiveness of (bond) yields becomes more attractive relative to equities.”

Stocks were also around key technical levels. The S&P 500 on Thursday closed below its 200-day moving average — a closely watched long-term trendline — for the first time since May. With another decline on Friday, the index ended at its lowest point since September and fell below November lows that strategists had also identified as worrisome levels.

Reports on manufacturing, services activity and consumer sentiment highlight a relatively light week ahead for US economic data. A major energy conference in Houston that will feature top global industry executives could draw Wall Street’s attention.

Events in Iran were likely to loom largest. In a note on Thursday morning, analysts at UBS Global Wealth Management said the latest developments were “pushing markets to price in a higher risk of prolonged conflict, deeper infrastructure damage and higher-for-longer crude prices.”

“While a less damaging outcome in the Strait of Hormuz remains possible, recent events have narrowed that path and heightened the risk of continued volatility,” the UBS analysts said.