US, Iran weigh longer truce as Pakistan steps up mediation

Pakistan stepped up efforts to ensure the U.S. and Iran prolong a ceasefire beyond its official expiry date next week, to allow more time to negotiate a lasting peace deal.

Market expectations that the warring sides are approaching a formal end the conflict have risen in the past two days, with many stock exchanges reversing their wartime losses and even hitting record highs. That’s despite extensive damage to Gulf energy infrastructure and the effective closure of the strategic Strait of Hormuz.

The U.S. and Iran are considering a two-week ceasefire extension, according to a person familiar with the matter, who asked not to be identified discussing sensitive matters. Neither side wants to resume fighting, said another person familiar with the discussions, with the war having devastated Iran’s infrastructure and sent fuel prices soaring, including in the U.S.

Still, there are many contentious issues for the countries to resolve. Those include the reopening of Hormuz — a key waterway for energy supplies — Iran’s nuclear and missile programs, sanctions relief for the Islamic Republic, and the ongoing war in Lebanon between Israel and Tehran-backed Hezbollah.

For now, Washington and Tehran are saying they haven’t agreed to any ceasefire that lasts beyond late Tuesday U.S. time.

There is a possibility the conflict turns into a “frozen war,” according to Sorana Parvulescu, a partner for Europe, Middle East and Africa at Control Risks.

“That is becoming more feasible because there is no good military option on the table right now for the U.S. and because the deal is probably going to prove itself more elusive than meets the eye,” she said in an interview with Bloomberg TV on Thursday.

Pakistan’s army chief, Asim Munir, traveled to Iran on Wednesday as part of the nation’s role as mediator, which included hosting high-level talks between U.S. and Iranian officials last weekend. He was greeted in Tehran by Iran’s Foreign Minister Abbas Araghchi.

Munir, who has positioned himself as the most powerful person in Pakistan, has a good relationship with U.S. President Donald Trump.

A key priority is reopening Hormuz, where tensions remain high as the U.S. continues a four-day blockade of vessels bound for and from Iran. Trump announced the move after the talks in Pakistan’s capital of Islamabad ended without a deal. The waterway has effectively been closed since the war erupted with U.S. and Israeli attacks on Iran in late February.

The MSCI All Country World Index — the broadest measure of global shares — rose as much as 0.3% to a record and was headed for a 10th day of gains on Thursday, the longest winning streak since September. Futures for the S&P 500 edged higher after the benchmark closed above the 7,000 mark for the first time.

Oil prices remain elevated, with Brent crude climbing to around $96 a barrel, albeit they’re well below last month’s peak of nearly $120.

Fighting between the U.S. and Iran has been on hold since April 7.

The White House hasn’t “formally requested an extension of the ceasefire,” Press Secretary Karoline Leavitt told reporters Wednesday. But she acknowledged “we remain very much engaged in these negotiations,” adding that Pakistan is the sole mediator.

The U.S. is sending thousands of additional troops to the Middle East in the coming days to pressure Tehran into making a deal, the Washington Post reported, citing officials it didn’t name. The forces include about 6,000 troops on the aircraft carrier USS George H.W. Bush and in its strike force.

Iran sees a prolonging of the U.S. blockade as “a prelude to a breach of the ceasefire,” said Ali Abdollahi, the commander of Iran’s joint military headquarters, according to state TV. Iran’s armed forces “will not permit any exports or imports to continue in the Persian Gulf, the Sea of Oman or the Red Sea” if the blockade continues, he said.

While Israel joined the U.S. in halting attacks on Iran last week, its military has kept up the campaign against Tehran-backed Hezbollah in Lebanon, complicating the broader push for peace.

Prime Minister Benjamin Netanyahu said he told the Israeli military, which invaded Lebanon last month, to expand the buffer zone it’s seeking to establish inside the country.

Negotiations are taking place about a potential ceasefire, Israel’s state-owned Kan News reported Wednesday, citing an unnamed official, who added no decision has been made.

The leaders of Israel and Lebanon will hold talks this week, Trump said in a post on social media. Beirut is seeking a ceasefire as an entry point for direct negotiations between the two countries, Lebanon President Joseph Aoun said on X, with the withdrawal of Israeli troops from the south of the country “an essential step.”

Talks between Israel and the government in Beirut, which has little sway over Hezbollah, took place on Tuesday in Washington. That conflict has killed more than 2,000 people and displaced a million, according to Lebanese authorities.

Those negotiations aren’t linked to the U.S.-Iran talks, according to a senior American official. The U.S. wants a durable peace in Lebanon but did not demand an immediate ceasefire, the official said.

Even so, any end to the war in Lebanon could ease tensions between the U.S. and Iran, which sees Hezbollah as a crucial ally.

“For us, the ceasefire in Lebanon is as important as the ceasefire in Iran,” Iran’s Parliament Speaker Mohammad Bagher Ghalibaf told Lebanese counterpart Nabih Berri, Iranian state TV reported on Thursday. Ghalibaf led Iran’s delegation in Islamabad over the weekend, negotiated with U.S. Vice President JD Vance.

Trump has vacillated between declaring the conflict with Iran nearly won and threatening escalation, while questions remain about the issues that drove the U.S. and Israel to launch the latest bombardment — chief among them concerns over Iran’s nuclear program.

The whereabouts of Iran’s uranium have been unknown since the U.S. and Israel bombed the country’s nuclear facilities in June last year, and International Atomic Energy Agency inspectors have been barred access since then.

Iran has said it isn’t pursuing a weapons program. The country’s right to peaceful use of nuclear energy “cannot be revoked,” Foreign Ministry Spokesman Esmail Baghaei said Wednesday. However, the level and type of enrichment are “negotiable,” he added.

Even with a deal, restoring Gulf energy flows fully may take weeks or even months, adding to fears of global inflation and a slowdown in economic growth. There are also concerns about disruptions to other supplies, particularly fertilizer, where shortages could hurt food output and raise prices.

The United Nations is ready to set up a corridor to move fertilizer through Hormuz, though it hinges on a political agreement, according to a top U.N. official.