Renewed clashes between the United States and Iran are corroding a tentative ceasefire enshrined in a 14-point Islamabad Memorandum of Understanding (MoU) signed in June, exposing conflicting readings of key clauses and the difficulty of converting a fragile pact into durable peace.
The MoU declared an end to overt hostilities and specified that the Strait of Hormuz would be open to commercial shipping. But analysts say the document left important questions ambiguous and postponed thorny matters - in particular, the future of Iran's nuclear programme - to a second phase of talks.
Recent public statements
Senior officials on both sides have publicly signalled that the initial agreement is fraying. U.S. President Donald Trump last week said the ceasefire was "over", accusing Iranian officials of failing to honour negotiated commitments. He added on Monday that the United States would likely take control of the Strait of Hormuz.
On the same day, Iranian Foreign Ministry spokesperson Esmaeil Baghaei blamed Washington for precipitating a crisis in the MoU, saying U.S. actions had consistently violated the agreement. Mediator Pakistan has urged all parties to uphold their obligations under the memorandum.
What is being contested in the Strait of Hormuz?
The Strait of Hormuz became a focal point after the conflict ignited with U.S.-Israeli strikes on Iran on February 28. Tehran effectively closed the waterway for a period, cutting off a corridor that had carried about one fifth of the world's oil and liquefied natural gas.
Article 5 of the MoU commits to the immediate resumption of commercial vessel traffic and states that Iran "will make arrangements using its best efforts for the safe passage of commercial vessels with no charge for 60 days only, from the Persian Gulf to the Sea of Oman and vice versa."
Iran reads this clause as recognition by the United States of Tehran's authority to manage the entire waterway, albeit without levying fees or tolls for an initial 60-day period. The United States, together with Gulf states, rejects that interpretation. They view the language as obliging Iran to facilitate safe transit for commercial shipping, not to exert control that is enforced by restrictions or force. U.S. officials have said the strait will remain toll-free.
In recent days Iran has fired on vessels it says attempted to transit the channel along an unapproved route and has declared the waterway closed once more. The U.S. Navy's Joint Maritime Information Center, however, reported on Sunday that a southern route through the strait remains available and has been widened to allow two-way traffic.
U.S. oil waivers and Tehran's exports
Article 10 of the MoU called for Washington to issue waivers permitting exports of Iranian crude, petroleum products and associated services, including banking, insurance and transport. For Iran, long constrained by sanctions, that provision represented a significant economic concession.
Despite that provision, on July 7 the United States revoked a licence that had allowed Iran to sell oil, stating that Iranian actions in the Strait of Hormuz were "wholly unacceptable" and warning of consequences. Tehran denounced the revocation as a breach of the MoU.
Frozen funds and disagreements over their use
Article 11 obliges the United States to make Iran's frozen or restricted funds and assets fully available and to negotiate procedures for releasing those resources during the course of talks. Among the assets mentioned are $6 billion held in Qatari accounts. Qatar stated on June 30 that it had not transferred those funds to Tehran.
On June 22, U.S. Vice President JD Vance said that the U.S. and Qatar would control the funds when they were unfrozen and suggested the money could be spent on U.S. corn, soy and wheat. Iran's ambassador to the United Nations in Geneva, Ali Bahreini, responded that Tehran alone would decide how to use any unfrozen assets.
Lebanon's role in the rupturing deal
Another flashpoint has been developments in Lebanon. Iran's parliament speaker and chief negotiator Mohammad Baqer Qalibaf on July 8 cited Israeli attacks in Lebanon as a violation of the MoU. Lebanon became entangled in the conflict after Iran-backed Hezbollah opened fire at Israel on March 2, prompting an Israeli offensive and an incursion into southern Lebanon. Under the memorandum, Iran had demanded that Israel cease fire in Lebanon.
Outlook for wider negotiations
The Islamabad MoU set out that the United States and Iran would seek a final agreement within a maximum period of 60 days, a timeframe extendable only by mutual consent. But with control over the Strait of Hormuz disputed and several provisions already challenged, neither side has announced a date for follow-up negotiations.
The gulf between the parties and the agreement's deliberate vagueness on key issues now mean a secondary accord may be required to salvage the initial memorandum. "The MoU is in crisis and you now need a secondary deal to restore it, if it is to be a basis for restoring calm," said Mohanad Hage Ali of the Carnegie Middle East Center. He added that the language in the MoU reflected both the complexity of the issues involved and the fragility of the arrangement.
What remains clear
- The Islamabad Memorandum of Understanding aimed to halt active hostilities and reinstate maritime traffic through the Strait of Hormuz, but key clauses are contested.
- Recent actions at sea, the revocation of at least one U.S. licence for Iranian oil sales, and disputes over the disposition of frozen funds have all contributed to rising tensions.
- With major issues deferred to a subsequent negotiating phase and no timetable agreed, the path to a comprehensive settlement is uncertain.
As diplomats and mediators press for adherence to the text, the competing interpretations of the same provisions are already shaping events on the water and in financial channels. That dynamic has left a short-lived ceasefire vulnerable to rapid deterioration and underlines how fragile interim arrangements can be when they do not resolve core disagreements.