A tentative two-week ceasefire between the United States and Iran has raised cautious hopes of reducing hostilities that have reverberated far beyond the Middle East, affecting global oil and gas markets due to disruptions at the strategic Strait of Hormuz. The ceasefire, brokered by Pakistan, was announced amid an ongoing conflict that has lasted over 40 days, with delegations from Washington and Tehran scheduled to begin negotiations in Islamabad.

Despite the pause in direct exchanges, tensions persist, especially regarding Lebanon’s role in the conflict. Iran insists that Lebanon, where Israeli forces continue operations against Hezbollah, is included in the ceasefire terms. However, Israel and the United States reject this view. Israeli Prime Minister Benjamin Netanyahu’s office clarified that Lebanon is not part of the temporary truce, a stance echoed by U.S. Vice President JD Vance, who leads the American delegation. Vance remarked that if Iran allows the talks to collapse over Lebanon—a matter he says does not concern them—it would be a strategic choice on Tehran’s part.

The differing interpretations over Lebanon contribute to an already fragile environment surrounding the talks. Both sides have maintained firm positions on several broader issues, complicating prospects for substantive progress. Iran’s demands include lifting all sanctions dating back to 1979, the withdrawal of American troops from the Middle East, reparations related to the conflict, and crucially, the right to continue its nuclear program. Tehran has proposed ten conditions, which U.S. officials have described as “workable,” although the nuclear issue remains especially contentious. Iran insists on retaining approximately 400 kilograms of uranium, the amount that originally sparked the conflict, a demand that faces significant resistance, particularly in Washington, given the political and financial investments made in countering Tehran’s nuclear ambitions.

The conflict’s economic implications were immediately apparent. Following the ceasefire announcement, oil prices fell to near $80 per barrel, and stock markets in the United States, Europe, and Asia responded positively. However, these gains were tempered as oil prices rose again soon after, reflecting fears that the fragile ceasefire might collapse if negotiations stall, especially over the nuclear issue.

Israeli officials remain uneasy even if Iran’s nuclear activities adhere strictly to safeguards monitored by the International Atomic Energy Agency. Israel retains a veto-like stance against Iran’s nuclear program, signaling a potential flashpoint that could reignite hostilities. Both U.S. and Iranian military leaders have issued warnings underscoring their readiness to resume combat operations if necessary. U.S. Defense Secretary Pete Hegseth stated that American forces are prepared to restart fighting at short notice, while Iran’s Revolutionary Guard declared it stands ready to respond forcefully to any attack.

As negotiations begin in Islamabad, the durability of the ceasefire remains uncertain. The combination of competing geopolitical interests, unresolved regional disputes, and deep-seated mistrust suggests that while a temporary lull in violence has been achieved, the path to long-term peace continues to face significant hurdles.