US and Iran Sign Interim Peace Deal to End 110-Day War as Lebanon Ceasefire Hangs in Balance

The signing of the Islamabad Memorandum of Understanding (MoU) by US President Donald Trump and Iranian President Masoud Pezeshkian marked the formal end to the 110-day conflict that devastated the Middle East and choked global energy markets. The 14-point framework, finalized after weeks of mediation by Pakistan and Qatar, aims to permanently terminate military operations on all fronts and reopen the Strait of Hormuz.[5][6][7]

But the ink was barely dry before the agreement faced a severe stress test. In Lebanon, a sudden escalation between Israel and the Iranian-backed militant group Hezbollah threatened to unravel the broader regional truce. Hezbollah forces killed four Israeli soldiers, prompting a wave of retaliatory Israeli airstrikes across southern Lebanon and the Bekaa Valley that left at least 47 people dead.[1][2][4]

The violence in Lebanon triggered an immediate diplomatic crisis. The United States abruptly canceled high-level implementation talks with Iran that were scheduled to take place in Switzerland. Vice President JD Vance, who was slated to lead the US delegation, halted his trip as dozens of White House officials and advance staff were already waiting in Obbürgen.[1]

Facing the collapse of the historic MoU, international mediators scrambled to contain the fallout. By Friday evening, a fragile renewed ceasefire between Israel and Hezbollah took effect, brokered through urgent backchannel communications involving the US, Qatar, and Iran. The truce pulled the broader Versailles agreement back from the brink, though Israeli officials warned they would respond forcefully to any further attacks.[3][4]

The core mechanism of the 14-point MoU explicitly ties the cessation of hostilities in Iran to the broader region. The text mandates an immediate end to military operations "on all fronts, including in Lebanon," effectively requiring Tehran to rein in its proxy network. In exchange, the agreement establishes a 60-day window to negotiate a final, binding settlement.[1][7]

The economic and maritime stakes of the deal are massive. The United States agreed to lift its naval blockade of Iranian ports within 30 days, while Iran committed to de-mining the Strait of Hormuz and restoring safe passage for commercial shipping. The reopening of the strait—a critical choke point for nearly one-fifth of the world's oil supply—promises to alleviate the global economic shock caused by the 110-day war.[5][6][7]

To incentivize compliance, the MoU outlines sweeping financial relief for Tehran. The US Treasury will issue immediate waivers for the export of Iranian crude oil, petroleum products, and associated banking services. Furthermore, the agreement commits the US and regional partners to develop a definitive plan for a $300 billion reconstruction and economic development fund for Iran, pending the final deal.[6][7]

The thorniest issue—Iran's nuclear program—has been deferred to the 60-day negotiating period. Under the interim agreement, Iran pledged to maintain the current status quo of its nuclear program and not to acquire a nuclear weapon, while the US promised not to impose any new sanctions or deploy additional forces to the region.[6][7]

In Israel, the US-Iran deal has been met with profound anger and a deep sense of betrayal. Prime Minister Benjamin Netanyahu, who was not a party to the MoU, has long rejected the concept of accommodation with Tehran. Across the Israeli security establishment and the broader public, the agreement is widely viewed as a strategic defeat orchestrated by the Trump administration.[5][8]

For decades, parts of the Israeli and US establishments operated under the assumption that sustained military and economic pressure could lead to regime change or fundamental destabilization in Tehran. Instead, the announced agreement suggests that the Iranian regime will emerge from the conflict intact, strengthened, and formally engaged by the world's most powerful military.[5]

The dispute over Lebanon remains a critical flashpoint. Despite the renewed ceasefire, Israeli forces remain deployed inside a designated security buffer zone in southern Lebanon. Hezbollah lawmakers have publicly declared that any ceasefire is "meaningless" as long as Israeli troops continue to occupy Lebanese territory, setting the stage for potential future clashes.[2][4]

Iranian officials have placed the onus on Washington to control its ally. Iran's deputy foreign minister stated that Tehran is ready to move forward with diplomacy, but insisted that the US has a "commitment and responsibility" to ensure Israel abides by the terms of the deal and ends its attacks on Lebanon.[2]

Globally, the reopening of the Strait of Hormuz has been met with profound relief. Energy markets, which had been choked by the double blockade of the strait and the constant threat of missile attacks, responded positively to the MoU. The resumption of normal maritime traffic is expected to significantly lower energy prices that had surged during the conflict.[5]

The drop in oil prices also carries geopolitical implications beyond the Middle East. During the war, Russia benefited financially from the restricted global supply and the resulting price spikes. The US-Iran deal, and the subsequent stabilization of the energy market, removes this financial windfall for Moscow.[5]

Ultimately, the durability of the Versailles agreement remains highly uncertain. US officials have emphasized that the 60-day window is fragile and that either side can walk away at any time. If the final negotiations collapse, Washington has indicated it is prepared to rapidly reimpose maximum economic and military pressure, leaving the region teetering on the edge of renewed conflict.[1]