After Iran fired a barrage of drones and missiles towards Israel a week ago, 70-year-old Hengameh removed the mirrors from her walls and urged family members to stay away from windows for fear of retaliatory strikes.

The Tehran resident, who lived through her country’s 1980s war with Iraq, said: “I am haunted by thoughts of getting stuck in a tall apartment building without water, electricity or food, if Israel attacks.” But following Israel’s limited retaliation on Friday, Hengameh has relaxed. “What a relief that it all ended that way. It all probably was meant to scare people,” she said.

Hengameh was not the only Iranian exuding relief after Israel’s muted response on Friday to Tehran’s assault on the Jewish state. The explosions near the central city of Isfahan came after an Iranian barrage of more than 300 drones and missiles last weekend, which in turn followed a strike on the Islamic republic’s consulate in Syria, blamed on Israel, early this month that killed seven Revolutionary Guards officers.

The exchange has brought a decades-long covert war into the open, and set the crowded streets, cafés, grocery stores and subways of the Iranian capital abuzz with anxious conversation about whether a full-scale conflict could follow.

Mohammad, 30, a videographer and fervent supporter of the Islamic republic, said of Israel’s Friday attack: “The strike carries the hallmark of similar sabotage attacks we have seen in the past. I believe [Israel] were only aiming at some kind of psy-war. This cannot even be considered a response.”

In an exultant tone, he added: “This was nothing. Look at all those jokes people are making [online].” Social media platforms were fizzing with humour and memes. “Do you know why Israel attacked so late at night? Because its quadcopters had trouble locating the address in Isfahan,” one Instagram post said.

Online and even on state television news, Iranians circulated a post on social media site X by Israel’s far-right national security minister Itamar Ben-Gvir, who on Friday commented on his country’s latest strike on its arch-enemy with the single word: “Weak”.

Taghi Azad Armaki, an Iranian sociologist, said the conflict was exposing a generation gap. The shadow of Iraq’s devastating invasion of Iran in 1980, and eight years of war that followed, has hung over Iran’s leadership since, as well as over Iranians old enough to recall that time.

“The older generation knows war through its destructive force,” Azad Armaki said. “To the new generation with a different sociocultural background, war is nothing but a fantasy they’ve experienced through computer games.” He argued that the developing conflict was essentially “a political confrontation. A kind of war that is being fought through the media, rather than in real life”.

After decades of proxy conflict between Iranian-backed militant groups in the region and US and Israeli forces, the latest exchanges raised fears of a regional war against the backdrop of the six-month conflict between Israel and Hamas in the Gaza strip. Carefully orchestrated strikes have punctuated intense diplomatic activity trying to prevent the conflict from escalating out of control.

Following the latest strike by Israel near Isfahan, Iranians were growing in confidence. Hours afterwards, footage circulated online of crowds on the banks of the Zayandeh River, a popular picnic spot in Isfahan, singing a patriotic song. State television interviewed local residents in Isfahan who jokingly called the strike “fireworks”.

Iran’s government said little on the subject of the strikes, a relative silence seen by some onlookers as a desire to defuse tensions. Two senior army commanders played down Israel’s latest attack as a minor incident, saying the country’s air defences were in a state of readiness and had quickly reacted to destroy the “suspicious” airborne objects.

President Ebrahim Raisi did not bring up the latest Israeli strike in a televised speech on Friday, but he lauded Iran’s attack on Israel last week for rallying people of various political tendencies around the flag.

Naeem, 28, a tour guide, said Iran’s barrage had been a wise move. “Without the attack, the possibility of a war erupting would have been greater. Israel violated our sovereignty and it deserved the blowback.”

Yet at the same time he evoked deeper discontent, contrasting the force of Iran’s assault on Israel with what he characterised as domestic disarray.

Since then US president Donald Trump in 2018 abandoned the nuclear deal Iran signed with world powers and imposed crippling sanctions, the country has endured deep economic stress. Untamed inflation and a weakening national currency are at the forefront of many Iranians’ concerns, and have contributed to waves of dissent.

Naeem said: “Thankfully in the military field, we are powerful enough to shatter the enemy’s invincibility. But why couldn’t we achieve the same in, say, the car industry or medicine? This system has failed to tackle all problems from economic hardship, to massive corruption, to [an] unstoppable brain drain, while highly unqualified individuals are occupying big offices.”

Government propaganda billboards and banners in Tehran have over the past week displayed themes ranging from Iran’s missile prowess to excerpts from US media such as “ABC News: Five ballistic missiles hit the Nevatim air base” and “NYT: Iran’s strikes on Israel open a dangerous new chapter for old rivals”.

Yet authorities also betrayed some insecurity. On the day of Iran’s missile barrage towards Israel, police forces enforcing mandatory headscarf wearing for women made a sudden reappearance in Tehran after an absence of more than a year. Some saw the enforcement of hijab rules as simply a means of justifying the visible presence of forces patrolling the streets.

“This was merely a pretext to deploy additional security and police forces in the streets ahead of the attack to ensure domestic stability,” an analyst said.

Nina, a 38-year-old musician, said of the Iranian government: “All these guys know is how to pull the country into conflicts. This was a bad mistake . . . The economy is in bad shape. We are under sanctions. The environment is sick. Pollution is killing us. And they are treating women on the streets like that. Getting into a war is the last thing we need right now.”

Ahead of the latest Israeli strike on Iran, some threats emanating from Tehran hinted at the possibility of producing nuclear weapons. Iran has faced western sanctions over its nuclear programme and in recent years it has enriched uranium close to weapons-grade, though it maintains the programme is purely civilian.

On Wednesday a senior figure in the Revolutionary Guards warned Israel that Iran was likely to review its nuclear stance if its atomic facilities were threatened.

Mohammad, the videographer, was sceptical that nuclear weapons would help the Islamic republic, however. “You may be able to use it as leverage to deflect threats if you are cornered,” he said. “But it does not keep war at bay. In the kind of deterrence Iran is building right now, there is no need for a nuclear bomb.”

Azad Armaki, the sociologist, said those hailing Iran’s strike on Israel, and those chanting against the country entering a war, shared a similar concern.

“Their message is the same: Iran must be protected,” he said. “This military confrontation has revived a collective devotion to the nation’s history, homeland and identity . . . It is no longer about the greater Islamic nation or civilisation, but it is about a love for Iran.”

WASHINGTON (AP) — After its midnight deadline, the Senate voted early Saturday to reauthorize a key U.S. surveillance law after divisions over whether the FBI should be restricted from using the program to search for Americans’ data nearly forced the statute to lapse.

The legislation approved 60-34 with bipartisan support would extend for two years the program known as Section 702 of the Foreign Intelligence Surveillance Act. It now goes to President Joe Biden’s desk to become law. White House national security adviser Jake Sullivan said Biden “will swiftly sign the bill.”

“In the nick of time, we are reauthorizing FISA right before it expires at midnight,” Senate Majority Leader Chuck Schumer said when voting on final passage began 15 minutes before the deadline. “All day long, we persisted and we persisted in trying to reach a breakthrough and in the end, we have succeeded.”

U.S. officials have said the surveillance tool, first authorized in 2008 and renewed several times since then, is crucial in disrupting terror attacks, cyber intrusions, and foreign espionage and has also produced intelligence that the U.S. has relied on for specific operations, such as the 2022 killing of al-Qaida leader Ayman al-Zawahri.

“If you miss a key piece of intelligence, you may miss some event overseas or put troops in harm’s way,” Sen. Marco Rubio, the top Republican on the Senate Intelligence Committee, said. “You may miss a plot to harm the country here, domestically, or somewhere else. So in this particular case, there’s real-life implications.”

The proposal would renew the program, which permits the U.S. government to collect without a warrant the communications of non-Americans located outside the country to gather foreign intelligence. The reauthorization faced a long and bumpy road to final passage Friday after months of clashes between privacy advocates and national security hawks pushed consideration of the legislation to the brink of expiration.

Though the spy program was technically set to expire at midnight, the Biden administration had said it expected its authority to collect intelligence to remain operational for at least another year, thanks to an opinion earlier this month from the Foreign Intelligence Surveillance Court, which receives surveillance applications.

Still, officials had said that court approval shouldn’t be a substitute for congressional authorization, especially since communications companies could cease cooperation with the government if the program is allowed to lapse.

House before the law was set to expire, U.S. officials were already scrambling after two major U.S. communication providers said they would stop complying with orders through the surveillance program, according to a person familiar with the matter, who spoke on the condition of anonymity to discuss private negotiations.

Attorney General Merrick Garland praised the reauthorization and reiterated how “indispensable” the tool is to the Justice Department.

“This reauthorization of Section 702 gives the United States the authority to continue to collect foreign intelligence information about non-U.S. persons located outside the United States, while at the same time codifying important reforms the Justice Department has adopted to ensure the protection of Americans’ privacy and civil liberties,” Garland said in a statement Saturday.

But despite the Biden administration’s urging and classified briefings to senators this week on the crucial role they say the spy program plays in protecting national security, a group of progressive and conservative lawmakers who were agitating for further changes had refused to accept the version of the bill the House sent over last week.

The lawmakers had demanded that Majority Leader Chuck Schumer allow votes on amendments to the legislation that would seek to address what they see as civil liberty loopholes in the bill. In the end, Schumer was able to cut a deal that would allow critics to receive floor votes on their amendments in exchange for speeding up the process for passage.

The six amendments ultimately failed to garner the necessary support on the floor to be included in the final passage.

One of the major changes detractors had proposed centered around restricting the FBI’s access to information about Americans through the program. Though the surveillance tool only targets non-Americans in other countries, it also collects communications of Americans when they are in contact with those targeted foreigners. Sen. Dick Durbin, the No. 2 Democrat in the chamber, had been pushing a proposal that would require U.S. officials to get a warrant before accessing American communications.

“If the government wants to spy on my private communications or the private communications of any American, they should be required to get approval from a judge, just as our Founding Fathers intended in writing the Constitution,” Durbin said.

In the past year, U.S. officials have revealed a series of abuses and mistakes by FBI analysts in improperly querying the intelligence repository for information about Americans or others in the U.S., including a member of Congress and participants in the racial justice protests of 2020 and the Jan. 6, 2021, riot at the U.S. Capitol.

But members on both the House and Senate intelligence committees as well as the Justice Department warned requiring a warrant would severely handicap officials from quickly responding to imminent national security threats.

“I think that is a risk that we cannot afford to take with the vast array of challenges our nation faces around the world,” Democratic Sen. Mark Warner, chair of the Senate Intelligence Committee, said Friday.

__

Associated Press writers Eric Tucker contributed to this report.

Stay informed with free updates

Simply sign up to the US equities myFT Digest — delivered directly to your inbox.

Nvidia’s share price plunged by 10 per cent on Friday, helping to seal the worst run for US stock markets since October 2022, as investors shunned risky assets ahead of a flurry of Big Tech earnings next week.

The chipmaker endured its worst session since March 2020, losing more than $200bn of its market value on the day. The decline accounted for roughly half of the 0.9 per cent fall in Wall Street’s S&P 500, according to Bloomberg data.

Netflix, meanwhile, shed about 9 per cent a day after the streaming service’s announcement that it would stop regularly disclosing its subscriber numbers overshadowed stronger than expected earnings. The tech-heavy Nasdaq Composite ended the session down 2.1 per cent.

Stocks that have been powered higher by investor enthusiasm for artificial intelligence also suffered, with Advanced Micro Devices, Micron Technology and Meta closing 5.4 per cent, 4.6 per cent and 4.1 per cent lower, respectively. Super Micro Computer, a server equipment group seen as a beneficiary of the AI boom, closed down 23 per cent.

“It’s a rough day for tech stocks,” said Kevin Gordon, a senior investment strategist at Charles Schwab. “Anything that was doing well earlier this year is unwinding, but banks and energy are doing well with [defensive] staples.” 

Friday’s moves come as investors have begun to take seriously the possibility that the US Federal Reserve could make just one quarter-point cut to interest rates this year, or perhaps none at all. Retaliatory strikes between Iran and Israel have also ratcheted up investor anxiety, denting the market rally.

But analysts said Friday’s sell-off was instead being driven by investors hurriedly repositioning their portfolios ahead of a flurry of Big Tech earnings next week. 

“The stock pullback has very little to do with [interest] rates,” said Parag Thatte, a strategist at Deutsche Bank. “It’s more to do with investors pricing in slower earnings growth [for Big Tech].”

Andrew Brenner, head of international fixed income at NatAlliance Securities, said “there is no relative pressure on rates” in the absence of fresh announcements from the Fed. “But equities are getting crushed.”

Microsoft, Alphabet and Meta all report results for the first quarter next week, while Nvidia’s results are due in late May. Although all are expected to have performed well, they face tough quarter-on-quarter comparisons.

Year-on-year earnings per share growth for Nvidia, Meta, Microsoft, Amazon, Alphabet and Apple peaked at 68.2 per cent in the fourth quarter of 2023. UBS analysts expect the so-called Big 6 to report EPS growth of 42.1 per cent for the first three months of this year.

Wall Street’s benchmark S&P 500 index shed 0.9 per cent on Friday, capping its worst week in more than five months in percentage terms. The index has declined every day since last Friday, its worst run in a year and a half.

All of a sudden, “the dip-buyers are not dip-buying . . . or if they are, they are getting swamped”, said Mike Zigmont, head of trading at Harvest Volatility Management.

The dollar index was steady on the day while oil prices rose modestly.