US President Donald Trump and Iran’s President have signed a deal aimed at ending the Middle East war, with Tehran agreeing to dilute its enriched uranium in exchange for large-scale economic relief from Washington.

Trump signed the memorandum of understanding on Wednesday during a candlelit dinner at the Palace of Versailles following a G7 summit. A video shared by a Trump aide showed French President Emmanuel Macron and other guests applauding the signing.

“Just signed it,” Trump told reporters as he stepped out of the palace after the ceremony.

Iranian Foreign Ministry spokesman Esmaeil Baqaei, quoted by the state news agency IRNA, confirmed the development, saying the document “was finalized with the signatures of the presidents.”

Pakistan’s Prime Minister Shehbaz Sharif, whose government helped mediate the agreement, said on X that the deal “shall enter into force with immediate effect.”

The agreement is expected to draw a line under a war that began on February 28 when the United States and Israel launched military operations against Iran, prompting retaliatory missile and drone strikes across the region.

The conflict escalated into a broader regional crisis and led to the effective closure of the Strait of Hormuz — a critical global oil shipping route.

“As a first step, Islamic Republic of Iran will instantly reopen the Strait of Hormuz and the United States of America will immediately lift the naval blockade,” Sharif said.

Under the agreement, Washington will also immediately waive oil sanctions that have significantly impacted Iran’s economy.

The deal further provides that once a final agreement is reached on Iran’s nuclear programme, the United States will facilitate the release of a $300 billion reconstruction fund supported by regional partners.

However, Iran’s participation in the signing ceremony was adjusted at the last minute. The agreement was originally expected to be signed by Iran’s chief negotiator and parliament speaker Mohammad Bagher Ghalibaf and US Vice President JD Vance, but Iran later said an in-person ceremony was unnecessary.

A formal signing event is now expected to take place Friday in Switzerland, with technical negotiations to follow.

Iranian officials have framed the agreement as a diplomatic win.

“People will see it and judge,” Ghalibaf said on state television after the deal was released.

He also noted that the agreement represents what Tehran considers a strategic success, despite economic concessions.

China, reacting to the development, said its top diplomat had urged Tehran to ensure all parties “genuinely implement” their commitments, stressing the global importance of stability in the region.

While the agreement has eased tensions globally, it has triggered criticism within the United States, including from members of Trump’s own Republican Party.

The war, which reportedly killed 13 US service members and drained American military resources, had become increasingly unpopular domestically.

US Senator Bill Cassidy criticised the deal, saying:

“Iran’s nuclear ambitions were not curbed, and they have learned that threatening the Strait of Hormuz works,” he said. “Sanctions will be lifted, and the bombing has stopped. This is the worst foreign policy blunder in decades.”

Trump, however, maintained a hardline stance on compliance, warning earlier that he was prepared to “bomb the hell” out of Iran if it violates the agreement.

The head of Lebanon’s Iran-aligned Hezbollah movement, Naim Qassem, described the agreement as a “great victory” for Iran, praising its role in securing provisions related to Lebanon.

He said the group appreciated Tehran’s insistence that the truce cover Lebanon, which became involved in the conflict after Hezbollah launched rockets at Israel on March 2 in support of Iran.

The agreement outlines a two-month negotiation window to develop a more comprehensive framework addressing Iran’s nuclear programme.

As part of the interim arrangement, Iran will dilute its enriched uranium stockpiles, potentially through “down-blending on site under the supervision of the IAEA,” the UN nuclear watchdog.

The move is expected to pave the way for broader economic relief measures.

A US official clarified that Washington would not be required to make direct financial contributions to the reconstruction fund.

Oil prices initially fell on optimism surrounding the agreement, extending losses recorded earlier in the week.

However, prices briefly surged by as much as five percent amid uncertainty over the signing before stabilising later in the trading session.

Analysts said markets were reacting to both geopolitical easing and ongoing uncertainty about the durability of the agreement.

Despite the diplomatic breakthrough, reports of continued violence emerged from the region.

Israeli strikes in southern Lebanon reportedly killed at least five people following the announcement, according to state media.

The Israeli military also confirmed that five soldiers were wounded in an explosive drone attack in southern Lebanon — the first such report since the agreement was signed.

It further said its air force intercepted several rockets fired at troops operating in the area, though no additional casualties were reported.