Everything you need to know about the US-Iran peace deal

US and Iranian officials say they have agreed on a deal to end their war and, with an agreement scheduled to be signed in Switzerland by the end of this week, direct hostilities between the two countries are expected to come to an end.

The full details of the agreement, hammered out between the two sides over the weekend, are yet to be fully revealed but here is what we know so far.

What are the terms of the deal?

The announcement of a peace deal was made by Pakistan’s Prime Minister Shehbaz Sharif and followed up by US President Donald Trump.

Trump said, “the Deal with the Islamic Republic of Iran is now complete,” in a post on Truth Social.

“Congratulations to all! I hereby fully authorise the toll-free opening of the Strait of Hormuz, and, simultaneously herewith, authorise the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!” he wrote on Truth Social.

Reopening the Strait of Hormuz

The key focus of the diplomatic breakthrough is the reopening of the Strait of Hormuz, the key waterway through which 20 per cent of crude oil travels.

Once signed, the agreement will restore shipping on the strait. The first part of that process will be the US military lifting its blockade of Iranian ports and removing sanctions on Iranian oil entering the global market.

In return, Iran will allow all commercial shipping to pass through the strait unhindered within 30 days. However, Iran’s foreign minister Abbas Araghchi said Iran wants a deal that allows Tehran to charge ships “for services rendered” when they transit the strait. Iran charged vessels for passage during the war, which the US and other nations have said violates international law.

The strait has long been considered an international waterway though it sits in the territorial waters of Iran and Oman. The US and Iran have also agreed to an immediate and tentative permanent end to military operations, including the conflict between Israel and Lebanon.

Trump’s announcement on Sunday (US time) has focused mainly on the Strait of Hormuz and did not mention Lebanon. While Israel has not released any official statement on the deal, it may not choose to stop its attacks on Hezbollah targets in Lebanon and put the peace process at risk.

Iran’s nuclear ambitions

The agreement in place also opens the door to a further 60 days of negotiations that will aim to resolve what happens to Iran’s stockpile of highly enriched uranium and its nuclear program. Iran’s nuclear ambitions were last debated in 2015 when the US government, under President Barack Obama, secured the Joint Comprehensive Plan of Action agreement that restricted Iran’s nuclear program in exchange for a lifting of sanctions.

Donald Trump publicly derided that deal during his first presidential campaign and unilaterally withdrew America from the accord in his first term, setting the stage for the tensions that culminated in the current hostilities.

Trump said on Sunday that the agreement in place creates a “wall to no nuclear weapon” but any concrete resolution on the issue will only be in place after the 60-day negotiation between the two countries.

What happened to oil prices after the announcement?

Oil prices fell to a three-month low and stock markets across the world have rallied on the news of the peace agreement. The Australian sharemarket jumped over 1 per cent as investors hoped the squeeze in the energy markets would stabilise as traffic returned on the Strait of Hormuz.

A gauge of Asian shares jumped more than 3 per cent amid broad gains across the region, with Japan’s Nikkei 225 headed for a record close. S&P 500 futures were up 1.2 per cent pointing to a positive start on Wall Street for US stocks.

“Markets have been waiting for this news for months, and the relief is already showing,” said Josh Gilbert, lead analyst for Asia Pacific and the Middle East at eToro, a multi-asset investment platform operator. “However, this is still a move of optimism, not certainty. The nerves won’t fully settle until the deal is signed, meaning investors should still err on the side of caution.”

All eyes will be on the Strait of Hormuz as the agreement is formally signed on Friday. There has been little activity in the strait since the news of the deal, except one liquefied natural gas tanker, Disha, testing the waters as it heads toward Hormuz.

Nearly 600 vessels are still stuck in the Persian Gulf and primed to exit, while hundreds are also waiting empty on the other side, according to shipping tracking service provider Kpler.

What did world leaders say about the deal?

Australian Prime Minister Anthony Albanese said the focus should turn to securing a long-lasting peace agreement.

“The Australian government welcomes the agreement by the United States and Iran. Australia has long called for de-escalation and an end to the conflict, including in Lebanon. As we have said, the longer this war goes on, the greater the impact will be. Continued restraint and constructive engagement will be essential to prevent further escalation and secure a lasting agreement.”

Leaders of Britain, France, Germany and Italy said in a joint statement that they were ready to work with the US and Iran to resolve the nuclear question.

“Iran must never acquire a nuclear weapon. We stand ready to work with the US, Iran and the IAEA to this end.”

Japanese Prime Minister Sanae Takaichi said her government “strongly hopes” that “free and safe navigation through the Strait of Hormuz will be ensured in practice, and that a final agreement on Iran’s nuclear issue and other matters will be reached as soon as possible.”

Meanwhile, a spokesperson for UN secretary-General António Guterres said: “the Secretary-General welcomes the announcement that the United States and Iran have agreed on a peace deal that provides for an immediate and permanent ceasefire, the reopening of the Strait of Hormuz, as well as a framework for further negotiations. This represents a critical step towards the peaceful settlement of the conflict.”

With AP, Reuters and Bloomberg

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