US and Iran Sign Initial Peace Deal: Sanctions Lifted, Strait Reopens, Nuclear Talks Pending

Top Summary

• What happened: The US and Iran signed an initial peace deal aiming to end their war, immediately lifting US sanctions and reopening the Strait of Hormuz.
• Why it matters: The agreement seeks to avert an “economic catastrophe,” stabilize global energy markets, and halt spiraling military conflict.
• What changes: US sanctions on Iran are terminated, the Strait of Hormuz is reopened for shipping, and a $300 billion plan for Iran's reconstruction is outlined.
• Who is affected: The United States, Iran, global economies reliant on energy, international shipping industries, and regional actors like Israel and Lebanon.

A Landmark Agreement Takes Effect

The presidents of the United States and Iran have signed an initial peace deal, immediately aiming to end the conflict between their nations. The agreement, signed in France during the G7 summit, includes the reopening of the crucial Strait of Hormuz, a $300 billion (£224 billion) plan for Iran's “reconstruction,” and the US terminating “all types of sanctions” on Iran.

However, a critical aspect — Iran's nuclear program — remains to be negotiated over an extendable 60-day period. US President Donald Trump defended the proposal, stating it would stave off an “economic catastrophe.” He also issued a stark warning, declaring the US would “bomb the hell” out of Iran if no final deal emerged.

Iranian President Masoud Pezeshkian confirmed Tehran's signing of the document on Wednesday. The agreement outlines that military operations on all fronts, including in Lebanon, are to see an “immediate and permanent termination.”

Lingering Distrust and Regional Tensions

Despite the agreement, Iranian parliamentary speaker and key negotiator Mohammad Bagher Ghalibaf expressed lingering distrust of the US. He told state media his country's “finger is on the trigger,” adding,

“If the enemy does not understand the language of logic, we will enter again with the language of power.”

 

The conflict had originally been launched by the US and Israel on 28 February, beginning with the assassination of Supreme Leader Ayatollah Ali Khamenei and top military officials. This spiraling conflict drove up energy prices and renewed inflationary pressures, exacerbated by Iran's de facto closure of the Strait of Hormuz, a waterway through which around 20% of the world's oil and liquefied natural gas (LNG) usually passes.

President Trump, speaking from the G7 summit in Evian-les-Bains, emphasised the deal would avert a “worldwide depression.” He noted that positive developments in peace talks historically led to stock market surges, while negative news caused significant declines.

Key Provisions and Nuclear Safeguards

The initial deal, a memorandum of understanding, was signed by Trump during a state dinner hosted by French President Emmanuel Macron at the Palace of Versailles. It stipulates that the US and Iran will commit to negotiating a final deal within a maximum of 60 days, extendable by mutual consent.

A core condition for Trump was that Iran "shall not procure or develop nuclear weapons," which Iran has reaffirmed in the agreement. Furthermore, Iran's enriched uranium will be "down-blended," or diluted, on site under the supervision of the IAEA, the UN's nuclear watchdog. This modifies an earlier US demand for the material's complete removal.

Following the announcement, oil prices dipped in early Asia trading on Thursday, with Brent crude around 1% lower at $78.79 (£59.21) a barrel. However, this remained approximately $8 higher than before the conflict began.

Strait of Hormuz and Missile Stance

For the Strait of Hormuz, the agreement ensures no charges for ships passing through the critical waterway for 60 days, though it leaves open the possibility of future charges, which did not exist before the conflict. Iran's parliamentary speaker Ghalibaf suggested that the Strait "will not return to pre-war conditions" and implied that charges could be levied after the 60-day period.

Regarding ballistic missiles, Trump, who previously vowed to obliterate Iran's arsenal, softened his stance at the G7, stating it would be “OK” for Tehran to possess such weapons "if other countries have them."

Despite the agreement's declaration of an immediate end to military operations, Israel stated it had no plans to withdraw troops from Lebanon and launched attacks on Hezbollah on Wednesday. Trump expressed concern that Israeli actions could jeopardise the deal, admonishing Israeli Prime Minister Benjamin Netanyahu at the G7, urging him for “a little softer touch.”

Political Fallout in Washington

As President Trump returned to Washington, the peace plan with Iran has already caused unease among lawmakers across the political spectrum. Republican Louisiana Senator Bill Cassidy, who recently lost his re-election bid to a Trump-backed challenger, sharply criticised the deal.

“This is the worst foreign policy blunder in decades,”

Cassidy stated.

 

What to Watch Next

The coming 60-day period will be crucial for negotiations on Iran's nuclear program. International attention will also focus on the long-term status of the Strait of Hormuz and whether Israel adheres to the agreement's call for the termination of military operations in Lebanon.