A last-minute diplomatic push has averted a major escalation in the Middle East, with the United States and Iran agreeing to a provisional two-week ceasefire that includes reopening the strategically critical Strait of Hormuz. The breakthrough comes after weeks of intensifying conflict that had threatened global energy supplies and financial markets.
The agreement was finalised just hours before a deadline set by Donald Trump for potential US military strikes on key Iranian infrastructure. The ceasefire, mediated with the support of Shehbaz Sharif, is aimed at creating space for fresh negotiations and preventing further escalation.
A key component of the understanding is the temporary reopening of the Strait of Hormuz, a vital artery for global oil shipments that handles roughly one-fifth of the world’s energy trade. Disruptions in the strait over recent weeks had sharply reduced tanker movement, triggering volatility in crude prices and raising concerns about supply shortages.
Iran has indicated that maritime traffic will resume under coordination with its armed forces during the ceasefire period. The move is expected to restore some normalcy to global oil flows, although uncertainties remain over the durability of the arrangement.
Global markets responded swiftly to the de-escalation. Oil prices fell sharply amid expectations of improved supply, while equity markets rallied on reduced geopolitical risk. The dollar weakened as investors shifted towards riskier assets, signalling a broad relief rally across financial markets.
For energy-importing countries such as India, the easing of oil prices could offer short-term relief on inflation and trade balances. However, analysts caution that the situation remains fluid and dependent on sustained diplomatic progress.
While Israel has backed the US-led ceasefire, its position remains limited to the Iran front. Benjamin Netanyahu has indicated that the agreement does not extend to ongoing hostilities involving Hezbollah in Lebanon, highlighting the fragmented nature of tensions in the region.
At the same time, there were reports of continued military activity in the hours leading up to the ceasefire deadline, underlining the fragile ground situation.
Pakistan has invited both Washington and Tehran for talks in Islamabad later this week, with Iran signalling its willingness to participate. The US response is awaited, leaving uncertainty over whether negotiations will proceed as planned.
The ceasefire framework is expected to be based on a 10-point proposal put forward by Iran, although discrepancies between different versions of the plan—particularly around nuclear enrichment—have added to the complexity of negotiations.
Iran’s foreign minister, Abbas Araghchi, has confirmed Tehran’s commitment to the temporary truce, while signalling that broader issues, including its nuclear programme and sanctions relief, will be central to upcoming discussions.
Governments across the world have welcomed the development but remain cautious. Several countries have stressed the need for sustained dialogue to address the underlying causes of the conflict and ensure long-term stability in the region.
Energy-dependent economies in Asia, including Japan and South Korea, are closely watching developments, given their heavy reliance on oil shipments passing through the Strait of Hormuz.
The ceasefire offers a critical pause after nearly five weeks of conflict that saw repeated threats of escalation and significant disruption to global energy markets. However, with key issues unresolved and multiple actors involved, the agreement is widely seen as a temporary reprieve rather than a lasting solution.
For now, the reopening of the Strait of Hormuz and the halt in hostilities provide a window for diplomacy—one that global markets and policymakers will be watching closely.