US, Iran Agree to Two-Week Ceasefire as Israel Escalates Parallel War in Lebanon

Relief over a truce between the United States and Iran gave way on Wednesday to alarm that fighting was still raging across the region, as Israel launched its biggest attacks yet on Lebanon, and Iran struck Gulf neighbors’ oil facilities.

World financial markets rose after President Donald Trump announced the agreement late on Tuesday, two hours before a deadline he had set for Iran to open the blockaded Strait of Hormuz or face the destruction of its “whole civilisation.”

But even as Israel and the United States paused their attacks on Iran, Israel escalated its parallel war in Lebanon, launching its heaviest strikes yet, sending huge columns of smoke above Beirut as buildings crumpled.

Lebanon’s health minister said dozens had been killed and hundreds wounded. Residents said some of the Israeli strikes had come without the usual warnings for civilians to evacuate.

Iran’s Tasnim news agency cited an unnamed source warning that Iran will withdraw from the ceasefire if attacks on Lebanon continue.

Long after the ceasefire was meant to take effect, Kuwait, the UAE and Bahrain all reported fresh Iranian missile and drone strikes, several of which targeted vital oil, power and desalination infrastructure.

Iran also attacked Saudi Arabia’s huge East-West Pipeline to the Red Sea just hours after the ceasefire was agreed, an industry source told Reuters. The pipeline is the main route by which some oil has been able to bypass the blockaded strait.

Talks Could Take Place in Pakistan

Pakistani Prime Minister Shehbaz Sharif said he had invited Iranian and U.S. delegations to meet in Islamabad on Friday, and that Iran’s president had confirmed Tehran would attend.

With several of Iran’s veteran political leaders killed in the war, Iran’s delegation is expected to be led by parliament speaker and former Revolutionary Guards Commander Mohammad Baqer Qalibaf, with Foreign Minister Abbas Araqchi.

Trump told the New York Post that in-person talks would happen soon, but said his Vice President JD Vance might not attend because of security concerns – contradicting media reports that Vance would lead the U.S. delegation.

Despite concerns over the durability of the ceasefire, Brent crude LCOc1, which had risen by more than 50% since the war began, was down around 15% on the day, at $94.50 a barrel at 1440 GMT. O/R

U.S. stocks jumped to near one-month highs, joining a major global relief rally. MKTS/GLOB.N

Though both the United States and Iran declared victory, their core disputes remained unresolved, with each sticking to competing demands for a deal that could shape the Middle East for generations.

The Strait of Hormuz remained shut. A senior Iranian official involved in the discussions told Reuters Tehran could open it on Thursday or Friday ahead of peace talks.

Any opening, however, would be conditional on agreement over a ceasefire framework, and would be limited, with ships still requiring Iran’s permission to pass.

In a flurry of online posts, Trump announced new tariffs of 50% on all goods from any country that supplies arms to Iran. He insisted Iran had undergone “regime change” and would agree not to enrich uranium, which can be used in nuclear warheads.

“The United States will, working with Iran, dig up and remove all of the deeply buried…Nuclear ‘Dust,” Trump said.

Defense Secretary Pete Hegseth said Washington had won a decisive military victory, and that Iran’s missile program had been functionally destroyed.

Iran’s Ruling Establishment Survives

Crowds took to the streets of Iran overnight to celebrate, waving Iranian flags and burning those of the United States and Israel. But there was also wariness that a deal would not hold.

“Israel will not allow diplomacy to work and Trump might change his view tomorrow. But at least we can sleep tonight without strikes,” Alireza, 29, a government employee in Tehran, told Reuters by phone.

The war was launched on February 28 by Trump and Israeli Prime Minister Benjamin Netanyahu, who had announced they aimed to prevent Iran from projecting force beyond its borders, end its nuclear program and create conditions for Iranians to topple their rulers.

But so far Iran retains both its stockpile of near-weapons-grade highly enriched uranium and its ability to hit its neighbors with missiles and drones. The clerical leadership, which faced mass protests months ago, has withstood the superpower onslaught with no sign of internal collapse.

And Tehran’s newly demonstrated ability to cut off Gulf energy supplies through its grip on the strait, despite decades of massive U.S. military investment in the region, could reshape Gulf power dynamics for years.

“The enemy, in its unjust, illegal and criminal war against the Iranian nation, has suffered an undeniable, historic and crushing defeat,” Iran’s Supreme National Security Council said.

Netanyahu’s office said Israel supported the decision to suspend strikes on Iran for two weeks. But the agreement is a blow for the Israeli leader, who had repeatedly said he wanted Iran’s rulers to fall.

Yair Golan, a former Israeli military deputy chief of staff, called the outcome a “complete failure that endangered Israel’s security.”

“The nuclear program was not destroyed. The ballistic threat remains. The regime is still intact and is even emerging from this war stronger,” he wrote on X.