US and Iran Sign Memorandum of Understanding to End War and Reopen Hormuz Strait

The United States and Iran have signed a memorandum of understanding aimed at ending their conflict and reopening the Strait of Hormuz, with the agreement taking immediate effect on June 17, 2026. US President Donald Trump signed the document at Versailles Palace while dining with French President Emmanuel Macron, and Iranian President Pezeshkian signed on behalf of Iran. The memorandum contains 14 provisions detailing the reopening of the Strait of Hormuz and easing of certain financial restrictions on Iran. Pakistan's Prime Minister Shehbaz Sharif confirmed the agreement's effectiveness and announced that Pakistan and Qatar would co-host a formal signing ceremony in Switzerland on June 19. Trump stated that as long as Iran "behaves well," the United States would unfreeze Iran's assets and lift sanctions, characterizing the frozen funds as rightfully belonging to Iran.

The memorandum represents a significant shift from Trump's earlier stated war objectives, which included regime change in Iran. Instead, the agreement commits both nations to "mutual respect for sovereignty and territorial integrity" and non-interference in internal affairs. The accord includes provisions for the US to allow Iran to retain some ballistic missiles, permit partial Iranian oil export exemptions during an initial 60-day ceasefire extension, and establish a $300 billion reconstruction and economic development fund for Iran—though fund activation depends on reaching a final comprehensive agreement. Notably, the memorandum addresses Iran's enriched uranium through dilution under International Atomic Energy Agency supervision rather than transferring nuclear materials to the US as Trump had previously demanded.

The Strait of Hormuz, which carries approximately one-fifth of global oil shipments, had remained largely blockaded since February 2026 when the US and Israel launched military strikes against Iran. This closure triggered a severe global energy crisis, forcing the US to release unprecedented quantities of strategic petroleum reserves. The US Department of Energy reduced its Strategic Petroleum Reserve to 340.3 million barrels—the lowest level since July 1983—by releasing over 172 million barrels to offset the supply loss from the Strait's closure. International Energy Agency member states collectively agreed to release 400 million barrels, yet this proved insufficient to fully cover the 900 million barrels daily shortfall created by the blockade.

Following the agreement announcement, Brent crude oil prices declined, falling to approximately $79 per barrel by June 18—a 30 percent drop from May 4's peak of $114 and approaching pre-conflict levels around $73 per barrel from late February. Trump emphasized at the G7 summit that without the memorandum, US strategic reserves would have depleted within four weeks, causing unprecedented global market chaos. However, analysts and officials acknowledge that the global energy landscape has fundamentally shifted. China's reduced crude oil imports—down 29 percent year-on-year to an eight-year low in May—helped moderate oil prices during the crisis by reducing demand by approximately 380 million barrels daily, equivalent to 25 percent of typical Hormuz traffic.

The memorandum is explicitly not a final agreement; a comprehensive nuclear accord remains subject to 60-day negotiations with potential extensions. Iran's asset unfreezing depends on achieving this final settlement. The agreement has provoked domestic criticism from some Republicans and Trump detractors who contend the administration made excessive concessions to Tehran to lower oil prices before the November midterm elections. American officials stated that beyond nuclear matters, discussions will address regional stability and support for proxy militias. Iran's Foreign Minister Araghchi confirmed that the memorandum would be formally signed and take effect on June 19 in Switzerland, following which both nations will pursue 60 days of negotiations toward a comprehensive accord.

The crisis has prompted major energy-consuming nations to accelerate energy transition strategies. Japan, South Korea, and other developed economies are expanding nuclear energy capacity and diversifying away from fossil fuel dependence. Meanwhile, some nations are reverting to coal to secure energy supplies, reflecting a broader policy shift toward "security first" approaches. Analysts note that while the Strait's reopening may restore oil prices to pre-conflict levels, the fundamental restructuring of global energy security architecture established since 1973 has been irreversibly altered.