The United States and Iran are moving cautiously toward a formal agreement to end their two-month war, with Pakistan playing a central mediating role and international markets responding with cautious optimism. A fragile ceasefire has largely held since 8 April, but direct talks held in Islamabad last month ended without a breakthrough. Now, both sides appear to be reviewing a reported one-page memorandum of understanding that could formally end hostilities and set the stage for broader negotiations.

Under the reported framework, Iran would commit to not developing a nuclear weapon and pause uranium enrichment for at least 12 years, while the US would lift sanctions and release billions of dollars in frozen Iranian assets. Both sides would also reopen the Strait of Hormuz — the narrow waterway between Iran and the Arabian Peninsula through which roughly a fifth of global oil and gas supplies pass — within 30 days of signing. Pakistan's Foreign Ministry described its role carefully. "As mediators, we will not lose the trust of both parties by revealing details," it said in a statement, while Foreign Office spokesperson Tahir Andrabi said Islamabad expected an agreement "sooner rather than later." Negotiations are being led on the US side by envoy Steve Witkoff and Jared Kushner, according to Reuters.

Significant obstacles remain. Iranian officials have firmly stated that nuclear enrichment is non-negotiable at this stage, with one lawmaker dismissing the US text as "more of an American wish-list than a reality." Tehran insists any deal must first formally end the war, lift sanctions and resolve the Strait of Hormuz standoff — only then would it be willing to discuss its nuclear programme in a second phase. The US and Israel bombed Iranian nuclear sites last June, and President Trump has continued to demand a full halt to enrichment and the removal of Iran's existing stockpile of near-weapons-grade uranium from the country. Iran currently holds around 440kg of uranium enriched to 60 percent; a 90 percent threshold is required to produce a nuclear weapon. Tehran maintains its programme is for civilian purposes.

Complicating matters further is the question of internal Iranian cohesion. Iranian President Masoud Pezeshkian met this week with Supreme Leader Mojtaba Khamenei — who assumed the role two months ago following his father Ayatollah Ali Khamenei's death in the initial strikes on 28 February — describing the encounter as marked by "trust, calm, solidarity, and direct, unmediated dialogue." The meeting appeared designed to counter US messaging that Iran's leadership is fractured. US Secretary of State Marco Rubio had publicly suggested as much, saying Tehran faced difficulties because of "a fracture in their own leadership system." Analysts note that the Islamic Revolutionary Guard Corps has significantly consolidated its influence over strategic decision-making since the war began, particularly regarding the Strait of Hormuz, which Tehran now views as a core deterrent rather than simply a trade route.

A CIA intelligence assessment presented to the White House, cited by The Washington Post, concluded that Iran retains significant missile capabilities and can withstand the economic pressure of the blockade for at least three to four months — a timeline that US officials believe far exceeds earlier CIA estimates. With the blockade of Iranian ports straining not only Iran but also US Gulf allies including the UAE, Bahrain, Qatar and Kuwait, pressure is mounting on all sides to reach a settlement. Trump warned this week that "if they don't agree, the bombing starts," even as the US military fired on an Iranian oil tanker attempting to breach the American blockade. Analysts warn that the most likely near-term outcome remains prolonged managed confrontation interspersed with diplomacy, rather than either a full agreement or a return to all-out war.