Open warfare was prevented only by Humphrey of Toron swearing allegiance to Guy, which ended the succession dispute. The Muslim chronicler Ali ibn al-Athir claimed that Raymond was in a 'state of open rebellion' against Guy. In the background of those divisions, Saladin had become vizier of Egypt in 1169 and had taken Damascus in 1174 and Aleppo in 1183. He controlled the entire southern and eastern flanks of the crusader states. He united his subjects under Sunni Islam and convinced them that he would wage holy war to push the Christian Franks from Jerusalem. Saladin often made strategic truces with the Franks when he needed to deal with political problems in the Muslim world, and one such truce was made in 1185. It was rumoured by the Franks that Raymond III of Tripoli had made an agreement with Saladin under which Saladin would make him King of Jerusalem in return for peace. That rumour was echoed by Ibn al Athir, whether that was true is unclear. Raymond III was certainly reluctant to engage in battle with Saladin. In 1187 Raynald of Châtillon raided a Muslim caravan while the truce with Saladin was still in place. Saladin swore that he would kill Raynald for violating the truce, and he sent his son Al-Afdal ibn Salah ad-Din and the emir Gökböri to raid the Frankish lands surrounding Acre.

Gerard de Ridefort and the Templars engaged Gökböri in the Battle of Cresson in May 1187 and were heavily defeated. The Templars lost around 150 knights and 300 foot-soldiers, who had made up a great part of the military of Jerusalem.

Jonathan Phillips states that 'the damage to Frankish morale and the scale of the losses should not be underestimated in contributing towards the defeat at Hattin'. In July Saladin laid siege to Tiberias, where Raymond III's wife, Eschiva, was trapped.

In spite of that, Raymond argued that Guy should not engage Saladin in battle and that Saladin could not hold Tiberias because his troops would not stand to be away from their families for so long. The Knights Hospitaller also advised Guy not to provoke Saladin.

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