By Steve Holland, Parisa Hafezi, Alexander Cornwell and Maya Gebeily
WASHINGTON/DUBAI/TEL AVIV/BEIRUT, April 8 (Reuters) - The United States and Iran agreed to a two-week ceasefire brokered by Pakistan, suspending a six-week-old war that has killed thousands, spread across the Middle East and caused unprecedented disruption to the world's energy supplies.
There was relief on many of the region's streets and in world financial markets after President Donald Trump announced the agreement late on Tuesday, two hours before a deadline he had set for Iran to open the blockaded Strait of Hormuz or face the destruction of its "whole civilisation".
But even as Israel paused its attacks on Iran, it escalated its parallel war in Lebanon, launching what it described as its biggest strikes yet, which Lebanon's health minister said had caused hundreds of casualties.
Though the United States and Iran both declared victory, their main disputes remained unresolved, each sticking to competing demands for a potential peace deal that could shape the Middle East for generations.
A senior Iranian official involved in the discussions told Reuters Tehran could open the Strait of Hormuz on Thursday or Friday ahead of planned peace talks in Pakistan, if a framework for the ceasefire is agreed.
By Wednesday afternoon, the U.S. and Israel appeared to be abiding by their promise to pause the devastating air campaign that had pounded hundreds of Iranian targets a day for six weeks.
But in Lebanon, explosions tore through residential areas in Beirut and huge columns of smoke rose into the sky. Residents in Beirut and the south said the attacks had come without the usual warnings to evacuate targeted buildings.
Meanwhile, Iran's Gulf neighbours, including Kuwait, the UAE and Bahrain, were still reporting incoming attacks by Iranian missiles and drones. Two sources said there had been attacks on Saudi Arabia's pipeline to the Red Sea, the main outlet for Gulf oil to bypass the blockaded strait.
INVITATION TO TALKS
Pakistani Prime Minister Shehbaz Sharif said he had invited Iranian and U.S. delegations to meet in Islamabad on Friday for what would be the first official peace talks of the war, and that Iran's president had confirmed Tehran would attend.
But there was no official confirmation from Washington of plans to attend in-person talks. The White House said no meeting would be considered official until formally announced.
U.S. Vice President JD Vance, seen as the potential head of an American delegation, said Trump had told negotiators to try to reach an agreement, though Vance stopped short of confirming talks at any specific time or place.
In a flurry of online posts on Wednesday morning, Trump announced new tariffs of 50% on all goods from any country that supplies Iran with arms. He insisted that Iran had undergone "regime change" and that it would agree not to enrich uranium, which can be used in nuclear warheads.
Defense Secretary Pete Hegseth said Washington had won a decisive military victory, and that Iran's missile programme had been functionally destroyed.
IRAN'S RULING ESTABLISHMENT SURVIVES
Washington said Iran had agreed to open the Strait of Hormuz, where a fifth of global oil and liquefied natural gas normally passes. But the senior Iranian official made clear this was still conditional on clinching a framework ceasefire agreement. The official said the initial opening, if agreed, would be "limited" and ships would still require Iranian permission to pass.
Crowds took to the streets of Iran overnight to celebrate, waving Iranian flags and burning flags of the United States and Israel. But there was also wariness that a deal would not hold.
"Israel will not allow diplomacy to work and Trump might change his view tomorrow. But at least we can sleep tonight without strikes," Alireza, 29, a government employee in Tehran, told Reuters by phone.
The war was launched on February 28 by Trump and Israeli Prime Minister Benjamin Netanyahu, who had announced they aimed to prevent Iran from projecting force beyond its borders, end its nuclear programme and create conditions for Iranians to topple their rulers.
But so far Iran retains both its stockpile of near-weapons-grade highly enriched uranium and its ability to hit its neighbours with missiles and drones. The clerical leadership, which faced a mass uprising months ago, withstood the superpower onslaught with no sign of domestic opposition.
And Tehran's newly proven ability to cut off Gulf energy supplies through its grip on the strait, despite the massive U.S. military presence built across the region over decades, could reshape the power dynamics of the Gulf for years.
"The enemy, in its unjust, illegal and criminal war against the Iranian nation, has suffered an undeniable, historic and crushing defeat," Iran's Supreme National Security Council said in a statement.
Netanyahu's office said Israel supported the decision to suspend strikes on Iran for two weeks. But the agreement is a blow for the Israeli leader, who had repeatedly said he wanted Iran's rulers to fall.
Yair Golan, a former Israeli military deputy chief of staff, called the outcome a "complete failure that endangered Israel's security".
"The nuclear programme was not destroyed. The ballistic threat remains. The regime is still intact and is even emerging from this war stronger," he wrote on X.
COMPETING PEACE PLANS
If peace talks open on Friday in Islamabad as announced, they will begin with the main demands of the warring sides unresolved. Washington has presented its demands in a 15-point plan, while Iran has responded with a 10-point plan of its own.
In a post overnight, Trump acknowledged receiving the Iranian plan and called it "a workable basis to negotiate", which Iran's powerful security council said amounted to accepting its terms in principle. Those include lifting all sanctions, compensating Iran for damage and leaving it in control of the strait.
An Israeli official said senior Trump administration officials had assured Israel that they would insist on previous conditions, such as the removal of Iran's nuclear material, a halt to enrichment and the elimination of ballistic missiles.
(Reporting by Reuters bureaus worldwide; Writing by David Dolan and Peter Graff; Editing by Kevin Liffey and Keith Weir)
