Ongoing military occupation of southern Lebanese territory by Israeli forces, coupled with stalled implementation of the June 2026 US-brokered trilateral framework, anchors trader expectations against normalization before 2027. The accord links phased Israeli withdrawals from pilot zones to verified Hezbollah disarmament and Lebanese Armed Forces control, yet sequencing disputes persist, with Israel conditioning further steps on militia demilitarization and Hezbollah rejecting disarmament absent full withdrawal. Recent reports highlight Hezbollah rebuilding capabilities in southern Lebanon, continued border tensions, and postponed Rome talks, while Lebanese officials note no active negotiations and seek UNIFIL mandate extensions amid economic strain. Full diplomatic relations would require overcoming these security and sovereignty barriers within the compressed timeline, scenarios such as verified disarmament progress or major regional de-escalation with Iran-linked actors remain possible but face substantial structural hurdles.