A last-minute demand from Iran's top diplomat threatens to unravel a tentative agreement to end months of Middle East conflict, potentially derailing a deal that was set to reopen a critical global energy corridor and restore market stability.
Iranian Foreign Minister Abbas Araghchi said Tuesday that any end to the war with the United States must include Israel's complete withdrawal from southern Lebanon—a condition Israel has already rejected and that could sink the agreement and lead to the resumption of all-out war.
"Without the withdrawal of Israeli forces from the territories they occupied during this war, the war has not fully come to an end," Araghchi said.
The demand exposes a fundamental ambiguity in the deal's terms. A U.S. official, speaking on condition of anonymity, said the agreement does not call for an Israeli withdrawal. Israeli Prime Minister Benjamin Netanyahu declared Monday that Israel would remain in Lebanon "as long as necessary." The deal itself has not been made public, and officials have offered contradictory interpretations of its contents.
The Agreement's Fragile Foundation
The pact, formally between the United States and Iran, was set to include a ceasefire in Lebanon despite Israel not being a party to the negotiations. The signing ceremony is scheduled for Friday at the Bürgenstock resort near Luzern, Switzerland, with Pakistan and Qatar serving as key mediators alongside the United States and Iran.
Pakistani officials involved in brokering the agreement say it calls for an end to military operations, including in Lebanon. However, Araghchi's latest statement appears to match the understanding of two regional officials with direct knowledge of the interim deal. Those officials said the accord would require Israel to leave nearly all territory it occupies in Lebanon, minus a few hilltop points along the border seized earlier. They indicated Iran insisted the accord include Lebanon in the final days of negotiations.
The timing of this demand creates immediate pressure on Netanyahu, who faces a dilemma: degrade Hezbollah's military capabilities while preserving an agreement championed by the United States, Israel's most important ally.
Market and Strategic Stakes
The agreement was designed to provide meaningful relief from a monthslong conflict that has destabilized global energy markets and raised prices for fuel, food, and other essentials far beyond the Middle East. The pact includes the "immediate" opening of the Strait of Hormuz, a crucial waterway for the world's energy supplies that has been effectively shut, and the lifting of the American naval blockade of Iranian ports.
The United States and Iran are set to begin 60 days of negotiations over Iran's nuclear program and potential sanctions relief following the initial agreement. The deal also includes the possibility of releasing Iran's frozen funds and a $300 billion fund to help rebuild Iran if Tehran meets certain benchmarks, according to senior U.S. officials. President Trump later clarified that the United States would not "invest" funds in Iran. Regional officials said the release of frozen Iranian assets would be tied to Tehran implementing the deal, and that Gulf Arab states have pledged to inject billions of dollars into Iran's economy.
Regarding Iran's nuclear program, regional officials said Iran has agreed to discuss ways to possibly "dilute or remove" its stockpile of highly enriched uranium. However, it remains unclear whether Tehran would agree to that, particularly with hard-liners opposing to giving it up. U.S. officials have not yet explained how they see the agreement addressing Iran's nuclear program, including who will verify compliance and who will destroy or remove highly enriched uranium believed to be buried under nuclear sites that were badly damaged by U.S. strikes this year.
Tensions with Key Ally
Israel invaded southern Lebanon after Hezbollah fired missiles across the border during the first week of the war. Since then, it has expanded its military footprint to levels unseen in decades and struck targets deep inside Beirut. Though Hezbollah has been weakened, it retains the ability to strike Israel, leaving open questions about the effectiveness of Israel's campaign.
Israeli strikes in Lebanon have killed nearly 4,000 people, including hundreds of civilians, and displaced more than 1 million. President Trump expressed frustration with Israel's approach on Tuesday, telling reporters he was "not happy with the way Israel has handled themselves with Lebanon and with Hezbollah." He criticized the duration of the campaign, saying "It just goes on forever" and that "Israel's fighting Hezbollah too long, and too many people are being killed."
As of Tuesday evening, Netanyahu had not seen the memorandum of understanding between the United States and Iran, according to a person familiar with the situation. Netanyahu's office did not immediately respond to requests for comment.
Trump said he is open to sending the emerging agreement to the U.S. Congress for review. "I like the idea, send it to Congress please," he said at the Group of Seven summit in the French Alps. "I mean who wouldn't approve it."
Republicans on Capitol Hill say they want Trump to provide more information about the agreement, with some expressing skepticism that the deal can deter Iran from pursuing a nuclear weapon.
Israel and the Lebanese government have entered into their own U.S.-mediated direct negotiations, of which Hezbollah was not a part. Those talks have yielded several announced ceasefires that were never implemented on the ground. Lebanese officials initially tried to keep Lebanon separate from the U.S.-Iran negotiations, not wanting to be seen as beholden to Iran, but they have since welcomed the announcement that the deal to end the U.S.-Iran war would include a ceasefire in Lebanon.
World leaders gathering in France for the G7 summit insisted the agreement needed to succeed, even as key questions remained unanswered. The leaders of France, Germany, Italy and the United Kingdom issued a joint statement congratulating the United States, the Iranian government and the mediators on what they called a "diplomatic breakthrough," saying it was vital for the deal to be quickly implemented. French President Emmanuel Macron said France and other Western nations were "ready to take action very quickly" to help reopen the Strait of Hormuz peacefully.
Why This Matters:
Iran's eleventh-hour demand for Israeli withdrawal threatens to collapse a deal designed to restore global energy market stability and reopen critical shipping lanes. The contradiction between U.S. assurances that the agreement does not require withdrawal and Iran's public insistence that it does raises fundamental questions about deal clarity and enforceability. For markets dependent on predictable Strait of Hormuz access, the agreement's collapse would mean continued disruption to energy supplies and elevated commodity prices. The fact that key terms remain ambiguous—with officials offering contradictory interpretations and the deal unpublished—suggests implementation challenges ahead. Additionally, the unresolved questions about verification of Iran's nuclear compliance and the disposition of highly enriched uranium represent significant gaps in a pact meant to address regional security. The potential for renewed conflict, combined with market uncertainty about whether the agreement will hold, underscores the costs of agreements reached without clear, public terms agreed to by all stakeholders.