The presidents of the US and Iran have electronically signed the memorandum of understanding (MoU) to end the conflict that has caused global supply shocks and price volatility in energy and commodity markets, marking the start of efforts to reopen the strait of Hormuz.
The US' White House in a social media post early today confirmed that US president Donald Trump signed the deal in Versailles, France. Iranian president Masoud Pezeshkian has also signed the text, according to Iran's semi-official news agency Tasnim, which is affiliated with the country's Islamic Revolutionary Guard Corps (IRGC).
The signing, which was originally scheduled to take place on 19 June in Switzerland, kicks off a period of 60 days to negotiate a final agreement on Iran's nuclear programme, as well as other issues.
"The Islamabad MoU shall enter into force with immediate effect and as a first step, [the] Islamic Republic of Iran will instantly reopen the strait of Hormuz and the United States of America will immediately lift the naval blockade," said Pakistani prime minister Shehbaz Sharif, who has been facilitating negotiations between the US and Iran, in a social media post on X.
Oil prices fell in early Asian trading.
The front-month August Ice Brent contract fell to $78.29/bl as of 11:30 Singapore time (03:30 GMT), down by 1.6pc from the previous day's close.
The July Nymex WTI contract dropped to $75.41/bl, down by 1.8pc from the day before.
Under the deal, Iran is committing to ensure that the movement of vessels from the Mideast Gulf to the Gulf of Oman and vice versa resumes to pre-war levels within 30 days, taking into consideration the need to remove technical obstacles and neutralise mines.
Iran also commits to allowing the passage of ships with no charge for a period of 60 days — a reference to the Iranian proposal to charge tolls or service fees on vessels transiting the strait. The traffic of commercial vessels will immediately start, and Iran and Oman will hold consultations to define the future administration and maritime services in the strait of Hormuz, in accordance with applicable international law and the sovereign rights of coastal states of the strait of Hormuz.
The US will lift all types of sanctions on Iran, on a schedule that will be negotiated as part of the final agreement. This is subject to Iran meeting its obligations with regard to its nuclear programme.
The US Treasury will also issue waivers allowing exports of Iranian crude oil, petrochemical products and their derivatives, and all related services including banking, insurance and transportation, according to the draft agreement.
The US and its "regional partners" will create a plan for the "rehabilitation and economic development" of Iran, ensuring financing of at least $300bn.
Trump on Wednesday justified his decision to grant unprecedented concessions to Iran on sanctions and other issues by the need to fully reopen the strait of Hormuz.
Trump acknowledged that the US has run out of military options to settle the conflict and to wrest control of Hormuz from the Iranian government.
"If we didn't do this deal, we could have dropped more bombs for another two, three, four weeks, but you would never have the Hormuz strait open, you would never have success," Trump told reporters at the conclusion of the G7 leaders' summit in France.
