Iran and the United States have signed a Memorandum of Understanding in Islamabad declaring an immediate and permanent end to military operations and setting a 60-day timetable to negotiate a final deal, according to the text of the agreement.

The document, mediated and witnessed by Pakistan, was signed on 28 Khordad (June 18) by representatives of both governments. It commits the two sides and their allies to halt all military operations, including in Lebanon, and to refrain from the threat or use of force against each other.

Under paragraph four, the US will begin removing its naval blockade immediately on signing and fully end it within 30 days, with vessel traffic restored in proportion to pre-war levels during that period. Washington also undertakes to withdraw its forces from Iran's vicinity within 30 days of the final deal.

Iran, for its part, pledged best efforts to ensure the safe passage of commercial vessels between the Persian Gulf and the Sea of Oman, free of charge for 60 days, and to clear technical and military obstacles, including de-mining, within 30 days. Tehran said it would hold talks with Oman and other Gulf littoral states on the future administration of the Strait of Hormuz.

On reconstruction, the US committed with regional partners to develop a plan worth at least $300bn for Iran's economic development, with the implementation mechanism to be finalised in the final deal within 60 days.

The agreement obliges Washington to terminate all sanctions against Iran, including UN Security Council and unilateral primary and secondary measures, on an agreed schedule as part of the final deal. Pending that, the US Treasury will issue waivers for exports of Iranian crude oil, petroleum products and derivatives, along with associated banking, insurance and transport services. Frozen Iranian funds and assets are to be made fully available on implementation.

Iran reaffirmed it would not procure or develop nuclear weapons. The two sides agreed to resolve the disposition of stockpiled enriched material through a mutually agreed mechanism, with down-blending on-site under International Atomic Energy Agency (IAEA) supervision, and to discuss enrichment and Iran's nuclear needs in the final deal. Both committed to maintaining the status quo pending that deal, with Iran freezing its nuclear programme and the US imposing no new sanctions or additional regional deployments.

The final deal is to be endorsed by a binding UN Security Council resolution. An executive mechanism will monitor implementation.

Financial markets greeted the broader détente with relief, ING said in a research note on June 18, though the Dutch bank cautioned that the return of shipping through Hormuz would be gradual, requiring mine clearance, insurance pricing and the loading of vessels over several months. Oil prices have already fallen, easing inflation fears. ING expects a prolonged Federal Reserve pause, a second European Central Bank hike this summer and a Bank of England hold, with UK rate cuts not seen until 2027.

The Islamabad MoU sets out 14 numbered provisions:

1. Iran, the US and their allies in the current war declare the immediate and permanent termination of military operations on all fronts, including in Lebanon, and undertake not to initiate war or use force against each other, while ensuring Lebanon's territorial integrity and sovereignty. The final deal will confirm the permanent end of the war.
2. Both sides undertake to respect each other's sovereignty and territorial integrity and to refrain from interfering in each other's internal affairs.
3. Both commit to negotiating and reaching the final deal within a maximum of 60 days, extendable by mutual consent.
4. Immediately on signing, the US will begin removing its naval blockade and any impediments against Iran, and will fully end the blockade within 30 days. During that period vessel traffic will be restored in proportion to pre-war levels. The US will also remove its forces from Iran's vicinity within 30 days of the final deal.
5. On signing, Iran will use best efforts to ensure safe passage of commercial vessels between the Persian Gulf and the Sea of Oman, free of charge for 60 days only. Traffic starts immediately and, accounting for the removal of technical and military obstacles and de-mining by Iran, will be reinstated within 30 days. Iran will hold dialogue with Oman, and discussions with other Gulf littoral states, on the future administration and maritime services of the Strait of Hormuz, in line with international law and coastal states' sovereign rights.
6. The US, with regional partners, undertakes to develop a definitive plan of at least $300bn for Iran's reconstruction and economic development. The implementation mechanism will be finalised in the final deal within 60 days. All required licences, waivers and permissions for the relevant financial transactions will be granted by the US.
7. The US undertakes to terminate all types of sanctions against Iran, including UN Security Council resolutions, IAEA Board of Governors resolutions and all unilateral primary and secondary measures, on an agreed schedule as part of the final deal. Both sides acknowledge the importance of the issue and express intent to address it immediately in negotiations.
8. Iran reaffirms it will not procure or develop nuclear weapons. The two sides agree to resolve the disposition of stockpiled enriched material through a mutually agreed mechanism, on the schedule in paragraph 7, with a minimum methodology of on-site down-blending under IAEA supervision. They also agree to discuss enrichment and other matters related to Iran's nuclear needs, based on a satisfactory framework in the final deal.
9. Pending the final deal, both maintain the status quo: Iran keeps its nuclear programme at its current state, and the US imposes no new sanctions and deploys no additional forces in the region.
10. Immediately on signing, and until sanctions are terminated, the US Treasury will issue waivers for exports of Iranian crude oil, petroleum products and derivatives, and all associated services including banking, insurance and transport.
11. The US undertakes to make fully available the frozen or restricted funds and assets of Iran on implementation of the MoU. The two sides will agree the release procedures during negotiations. Such funds, whether retained or transferred, will be usable for payment to any ultimate beneficiary designated by the Central Bank of Iran, with the US issuing all necessary licences and authorisations.
12. Both agree to establish an executive mechanism to monitor successful implementation of the MoU and future compliance with the final deal.
13. After signing, and subject to the start and continuing implementation of paragraphs 1, 4, 5, 10 and 11, the two sides will begin negotiations on the final deal exclusively on the remaining paragraphs.
14. The final deal will be endorsed by a binding UN Security Council resolution.

The document was signed on behalf of the governments of Iran and the United States, and witnessed by the government of Pakistan as mediator.