US and Iran receive peace proposal as Trump vows 'hell' over Strait

A Pakistan-crafted framework has been circulated to both Washington and Tehran proposing a two-tier approach: an immediate ceasefire to halt hostilities followed by a timetable for broader negotiations aimed at a comprehensive settlement. The outline envisages an initial memorandum of understanding finalised electronically via Pakistan, with in-person talks to follow.

Sources familiar with the draft say Pakistan’s army chief, Field Marshal Asim Munir, has been in sustained contact overnight with U.S. Vice-President J.D. Vance, special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araqchi as mediators seek agreement on the details. Reports indicate the plan would include provisions to reopen the Strait of Hormuz and a window—variously described as 15 to 45 days—to negotiate a broader package of security guarantees and sanctions relief. Tehran has so far signalled reluctance to reopen the Strait as part of a short-term, temporary deal.

The proposal and mixed official reactions had immediate market ramifications. Geopolitical risk premia pushed oil prices higher as traders priced in continued disruption to Gulf exports; Reuters reported elevated volatility in crude markets following the developments. Given the Strait’s strategic role in global energy flows, even tentative diplomatic progress may be priced as de-risking, while any breakdown would sustain higher price levels and wider market turbulence.

Politically, the draft reflects intensified regional mediation amid an atmosphere of escalating rhetoric. U.S. President Donald Trump publicly warned that failure to reopen the Strait would bring severe retaliation, a message that has complicated the diplomatic opening even as mediators press both sides to accept a phased settlement. The dual-track dynamic—hardline posturing alongside back-channel diplomacy—has been a consistent feature of recent weeks.

Analysts caution that while the plan, if implemented, could buy time and calm immediate shipping risks, durable resolution depends on enforceable mechanisms: verification of de-escalation, security guarantees for regional actors, and credible economic concessions that address Tehran’s core demands. Markets and policymakers will be watching whether mediators can convert an electronic memorandum into enforceable on-the-ground steps over the coming days; that sequence will determine whether the peace proposal merely pauses the crisis or opens a path to a lasting settlement.