U.S. and Iran Near Peace Deal to End 106-Day War, but Lebanon Fighting Threatens Truce

The United States and Iran are on the precipice of signing a landmark memorandum of understanding to end their 106-day war, a conflict that has devastated regional stability and choked global energy markets. U.S. President Donald Trump announced that a settlement is "pretty much completed," with a signing ceremony potentially taking place this weekend in Geneva, Switzerland. The diplomatic breakthrough comes after months of intense military exchanges, back-channel negotiations, and a near-miss escalation earlier in the week when Washington threatened renewed strikes before abruptly pivoting to peace talks. If signed, the deal would mark the most significant de-escalation since the war began, offering a desperately needed reprieve for the global economy.[1][3][4]

If finalized, the interim agreement would extend a fragile ceasefire by 60 days, lift U.S. naval blockades, and immediately reopen the Strait of Hormuz to commercial shipping without tolls. The strategic waterway, which handles a massive portion of the world's daily oil consumption, has been effectively closed by Iranian drones and missiles since the conflict escalated in early March. Reopening the strait is a primary objective for the U.S. administration, which has faced mounting domestic and international pressure over surging energy prices. The agreement also reportedly includes commitments from Tehran to halt any pursuit of a nuclear weapon, a core demand of the American negotiating team.[3][4]

In exchange for halting hostilities, Tehran is poised to receive significant economic relief. Draft terms reportedly include the unfreezing of $24 billion in Iranian assets held in foreign banks and the lifting of stringent international sanctions on its oil exports. Iranian officials indicate that Supreme Leader Ayatollah Mojtaba Khamenei has conceptually approved the framework, though final details remain under review by domestic decision-making bodies. The economic lifeline is crucial for an Iranian government that has absorbed intense U.S. and Israeli bombardments over the past three months, suffering severe damage to its military infrastructure and leadership ranks.[3][4][6]

Despite the optimism in Washington and Tehran, the reality on the ground remains highly volatile. Early Saturday morning, U.S. Central Command reported that American forces intercepted and destroyed multiple Iranian one-way attack drones targeting commercial vessels in the Strait of Hormuz. The incident underscores the fragility of the current truce, even as both nations insist a final deal has never been closer. U.S. officials described the drone launches as an attempt by hardline factions in Tehran to maintain leverage in the final hours of negotiation, while Iran's foreign ministry maintained that the draft agreement would not force them to surrender control over the strategic waterway.[1][5]

The most significant hurdle to a lasting, region-wide peace is the parallel conflict in Lebanon. Israel, which is not a party to the U.S.-Iran memorandum, has intensified its military campaign against the Iran-backed Hezbollah militia. The Israeli military recently issued new evacuation orders for 20 towns and villages in southern Lebanon, warning of imminent strikes and instructing residents to move north of the Zahrani River. Israeli Prime Minister Benjamin Netanyahu has signaled a preference to continue degrading Hezbollah's military capabilities, complicating efforts to achieve a broader de-escalation and frustrating Iranian negotiators who demand a comprehensive ceasefire.[3][4][5]

Iran has publicly maintained that any comprehensive agreement must include a cessation of hostilities on all fronts, including Lebanon. However, the shifting geopolitical landscape has emboldened Iran's new leadership. Having survived the initial onslaught of the war, Tehran appears more willing to withstand pressure and take calculated risks, believing it has already absorbed the worst of the military campaign that America and Israel can deliver. This newfound resilience has made Iranian negotiators less willing to compromise on their core regional alliances, setting up a tense standoff over how the final text addresses the ongoing violence in the Levant.[2][6]

The proposed signing in Geneva is strategically timed to coincide with the G7 summit in nearby Evian, France. U.S. Vice President JD Vance and Steve Witkoff, a special envoy, are expected to represent the United States, while Iran's Parliament Speaker Mohammed Baqer Qalibaf is slated to sign on behalf of Tehran. The choice of high-level, but not head-of-state, signatories reflects the interim nature of the memorandum, which is designed to pause the violence while setting the stage for more complex, long-term negotiations over Iran's nuclear program and regional proxy networks.[4][6]

Global markets have reacted positively to the prospect of peace, signaling relief after months of geopolitical anxiety. Asian equities surged and Brent crude oil prices fell to two-month lows following Trump's announcement, reflecting investor confidence that the critical Strait of Hormuz may soon resume normal operations. As diplomats race to finalize the text, the coming days will test whether the U.S. and Iran can compartmentalize the violence in Lebanon and the lingering skirmishes in the Gulf to secure a historic pause in a war that has reshaped the Middle East.[1][3][4]