US and Iran agree 2-week ceasefire that will open Strait of Hormuz
Donald Trump had warned of attacks that would threaten ‘a whole civilisation’
The US and Iran agreed a two-week ceasefire that would open the Strait of Hormuz shortly before Donald Trump’s deadline for Tehran to meet his demands or face strikes that he said would kill “a whole civilization”.
Oil prices fell sharply after Trump said Washington would halt its attacks as part of a “double-sided CEASEFIRE!” if Iran allowed shipping to resume through the critical waterway.
Iran’s foreign minister Abbas Araghchi confirmed Tehran would allow two weeks of “safe passage” in the strait through which a fifth of the world’s oil transits while the US and Iran began negotiations on a more permanent agreement.
The truce averts Trump’s threats of massive US strikes against Iran and promises to ease global energy markets. But a long-term resolution of the conflict will depend on how negotiations play out over the coming weeks.
Iran’s Supreme National Security Council said that talks with the US would begin on Friday in Islamabad to discuss a 10-point Iranian proposal, which included continued control over ship traffic in the Strait of Hormuz and the lifting of sanctions.
Brent crude and the US WTI oil benchmark were both trading below $96 a barrel during the Asia morning.
“Markets will be able to breathe for at least a few days while the finer details of a ceasefire are negotiated,” said Michael Alfaro, CIO of Gallo Partners, an energy and industrials-focused hedge fund.
But analysts also warned that a lasting decline in oil prices would depend on whether Iran would be willing to release its grip on the strait beyond the two-week window.
Iran’s 10-point plan will face opposition in Washington, where Trump has also faced blowback for rising petrol prices and the spectre of global inflation.
Saul Kavonic, an analyst at MST Financial, a financial services firm, said the two-week ceasefire would provide “some market pressure relief”. But he warned it was unlikely “oil and LNG production will restart until there is more confidence in a lasting ceasefire”.
Tehran has used its chokehold on the strait as a powerful leverage point. Trump last month began threatening to obliterate Iran’s critical infrastructure, including power plants, oil wells, bridges and desalination facilities if the Islamic republic did not open the waterway.
“Open the F*ckin’ Strait, you crazy bastards, or you’ll be living in Hell,” he wrote on social media on Sunday, before vowing to wipe out the country’s entire civilisation on Monday.
But even as Trump amplified his rhetoric, Washington has pushed for a short-term ceasefire, mediated by Pakistan, people familiar with the effort told the FT.
The US on Tuesday had been “really pushing” for a temporary deal with Iran that would allow Trump to delay the threatened onslaught in exchange for Iran letting traffic resume through the strait, said a former senior US official briefed on the talks.
The White House declined to comment on the negotiations.
Trump, in his social media post, said he agreed to the ceasefire at the request of Pakistan’s Prime Minister Shehbaz Sharif and Field Marshal Asim Munir, because the US had “already met and exceeded” all its military objectives, and was “very far along with a definitive agreement” for a more permanent end to the war.
He said Iran’s 10-point proposal presented “a workable basis on which to negotiate” and that “almost all of the various points of past contention have been agreed to between the United States and Iran”.
Iran’s leaders also said in a statement on Tuesday night that the Americans had accepted the “principles” of their 10-point plan “as the basis of negotiations”.
In addition to Iran’s continued control over the strait, the 10 points include the full cessation of hostilities by the US and Israel against Iran and its “Axis of Resistance”, which includes proxy groups such as Lebanon’s Hizbollah.
The points also called for “the withdrawal of United States combat forces from all bases and points of deployment within the region”, the Supreme National Security Council said in its statement.
Iran’s leadership has requested the release of frozen Iranian assets and the codifying of its demands through a binding UN Security Council resolution.
Iran said it would participate in the talks for a maximum of 15 days and warned it would end the war only if its proposals were solidified during negotiations.
Araghchi, who led two previous rounds of indirect talks with the US before they were cut short by American and Israeli bombardment, is expected to serve as Iran’s top negotiator in Islamabad.
Trump administration officials said on Tuesday night that the US military had halted its attacks on Iran.
The Israeli government on Tuesday night said it “supports” Trump’s decision to suspend strike on Iran, even as missile alert sirens sounded in central and southern Israel overnight.
But it said the ceasefire “does not include Lebanon”, where Israel has deployed ground troops and carried out an escalating bombing campaign against the Iran-backed Hizbollah in recent weeks.