Following Iran's air attack on Israel, concerns have mounted that Israel may retaliate despite being advised by President Biden not to do so. Evercore ISI Vice Chairman Krishna Guha joins Yahoo Finance to discuss the likelihood of an Israeli counterattack.

Guha notes that the market's reaction suggests "the risk of escalation may be coming down a bit." He observes that the way Iran launched the attack "seemed aimed at trying to send a signal, but not inflict serious damage and casualties in Israel." With Israel using US assistance to intercept the attacks, Guha believes Israel could "just take the win and step away." However, he acknowledges that Israel still has to weigh the pros and cons of "a retaliatory action."

Overall, Guha expresses the view that the "risks do seem to be moderating." While he states that it's not a "clear-cut call" whether Israel will choose to retaliate, he would be "pleasantly surprised" if they ultimately decided against a military response.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance.

This post was written by Angel Smith

Video Transcript

MADISON MILLS: President Biden telling Israeli Prime Minister Netanyahu to take the win, saying that the US will not participate in any counterstrike against Iran. Still, the situation remains tenuous as Israel's war cabinet has spent the morning debating its response. Joining us now on the potential risks of the conflict in the Middle East is Krishna Guha. He is Evercore ISI vice chairman. Krishna, it's great to have you here. Thanks so much for hopping on with us here on Yahoo Finance. First, just give us your assessment right now of what is happening and what likely, you think, is going to happen next.

KRISHNA GUHA: Well, I think you see in the market action today some relief, some confidence that the risk of escalation may be coming down a bit. So why? First of all, because of the nature of the attack that Iran launched, the force package, the geographies from which they attacked, the advance warning all seemed aimed at trying to send a signal but not inflict serious damage and casualties in Israel.

And on the other side, Israel's remarkable success, with US help, in essentially neutralizing that entire assault leaves us in a situation where potentially, as Biden has suggested, Israel could just take the win and step away. The issue here, though, is that Israel has to judge whether its own deterrence capabilities require them to do some kind of retaliatory action. And if so, at what level of intensity? For instance, would they consider striking one of the bases inside the territory of Iran from which these attacks were launched?