Risk reduction and cooling off: US and Iran agree to a mutual ceasefire, Strait of Hormuz set to reopen imminently

Over the past 11 hours the world has been intensely focused on the risk of escalation in the Middle East; a large-scale conflict nearly erupted but the situation ultimately moved toward a crucial de-escalation. According to authoritative media reports including CCTV, on April 7 local time, US President Trump announced,at the request of Pakistan, he agreed to suspend bombing and military strike operations against Iran for a period of two weeks.

In a post on social media, Trump said that after phone calls with Pakistan’s Prime Minister Shehbaz Sharif and Army Chief of Staff Asim Munir, the US made the above decision,on the condition of a comprehensive, immediate, and secure opening of the Strait of Hormuz by Iran. He emphasized this is a mutual ceasefire; the US has completed and even exceeded its stated military objectives, and has made significant progress toward a long-term US-Iran peace agreement and the Middle East peace process.

He also revealed that the US has received a ten-point proposal submitted by Iran, acknowledges it as a basis for negotiations, and that the two sides have almost reached consensus on past disputed points. The two-week window will be used to finalize the agreement; the situation is now close to resolution.

Buoyed by the ceasefire news, international energy markets swung sharply and safe-haven asset prices adjusted in tandem. Brent crude futures plunged about 16% in after-hours trading to $91 per barrel; West Texas Intermediate crude futures likewise fell about 16%, settling just above $94 per barrel, with global expectations of tight energy supply significantly cooling.

Iran responds: accepts ceasefire proposal; talks to launch in Islamabad on April 10

In the early hours of April 8 local time, Iran’s Supreme National Security Council issued a statement saying, by the instruction of the Supreme Leader and with the council’s approval,it accepts the ceasefire proposal mediated by Pakistan.

The statement said Iran has essentially achieved all objectives in this round of conflict and that the enemy has suffered a “historic, complete defeat”. Iran will continue to consolidate its gains, promote the construction of a new regional security and political order, and agreed to hold negotiations in Islamabad, Pakistan, with a plan to consolidate results through political talks within 15 days.

Iran later clarified that US-Iran talks will begin on April 10 in Islamabad and last for two weeks. Iran rejected the US-proposed plan,formulated its own ten-point planand transmitted it to the US via Pakistan; the core demands include:

· joint control with the Iranian Armed Forces over transit through the Strait of Hormuz

· ceasing hostile actions against members of the “Resistance Axis” and ending Israeli aggression

· withdrawal of US combat forces from all bases and deployment points in the region

· establishing a Strait of Hormuz security transit protocol that establishes Iranian leadership

· full compensation by the US for Iran’s related losses

· lifting all primary and secondary sanctions and related Security Council resolutions

· unfreezing all of Iran’s overseas frozen assets

· the above matters to be adopted by the Security Council as a binding resolution

Iran emphasized that any agreement reached in the negotiations will be binding under international law; this ceasefire and the talks represent an important diplomatic victory for Iran.

In the early hours of the same day, Iranian Foreign Minister Alaghezi, speaking on behalf of the Supreme National Security Council, responded to Pakistan’s mediation request:If the United States stops attacks against Iran, the Iranian armed forces will suspend retaliatory strikesOver the next two weeks, subject to coordination with the Iranian armed forces,vessels may transit the Strait of Hormuz safely within technical limitations.