The Islamabad Memorandum: What the June 2026 US-Iran Interim Deal Did — and Didn't — Settle

Reactions to the Terms on Israeli Withdrawal and Iranian Funding

Hezbollah

Hezbollah signaled it would adhere to the Lebanon ceasefire, viewing the agreement as a precursor for Israel's withdrawal . The group received commitments from Tehran that Iran would push for the withdrawal of Israeli forces . More importantly, with Iran poised to receive unfrozen assets, Tehran indicated it would increase funding for Hezbollah once its own financial assets were released, bolstering the group's political and financial position after heavy war losses .

Israel

Israel reacted with fury and defiance. The government made clear it did not consider itself bound by the deal.

• Defense Minister Israel Katz: "Israel won't withdraw from land seized in Lebanon, Syria and Gaza" .
• National Security Minister Itamar Ben Gvir: Denounced the deal, insisting Israel was not bound by it .
• Prime Minister Benjamin Netanyahu: Said the agreement was Trump's decision, but that Israel has its own interests, primarily protecting its security, and that Israel would not be constrained .
• Israeli military operations continued after the deal was announced, with air strikes on Lebanon and an Israeli attack in southern Beirut, triggering a flurry of diplomatic efforts to keep the ceasefire intact .

United States

The US presented a more cautious interpretation. A US official, speaking on condition of anonymity, said the agreement does not explicitly require an Israeli withdrawal, describing Iran's interpretation as a "non-starter" . The US framed the deal primarily as a mechanism to reopen the Strait of Hormuz and de-escalate the broader conflict, with financial relief contingent on Iran's conduct going forward .

The Financial Arrangement and Pakistan's Broker Role

Financial Terms: Two Very Different Stories

There was a significant gap between US and Iranian descriptions of the financial arrangements:

• Iran's claim: Tehran stated the deal provides for the release of $24 billion in frozen Iranian assets during the 60-day talks period, with some sources citing at least $12 billion initially . Iran's Supreme National Security Council said the deal would see financial assets released incrementally, from which Tehran would then fund Hezbollah .
• US position: Washington said financial relief would be phased and contingent on Iranian conduct. A senior US official told Axios the claim of unconditional access to frozen funds was "completely not true," calling Iran's characterization a "spin." The primary goal, officials said, was the reopening of the Strait of Hormuz and free movement of shipping for 60 days . The frozen-assets issue could be resolved by the US quietly authorizing private banks in Qatar to release the funds, giving Iran immediate cash before nuclear talks even began, though this remained unconfirmed .
• Reconstruction fund: The deal also included discussion of a possible $300 billion post-war reconstruction fund for Iran, though Trump stated the US would not contribute to it .

Pakistan's Central Mediation Role

Pakistan was the central mediator of the agreement, giving the MoU its name (Islamabad Memorandum) .

• Prime Minister Shehbaz Sharif announced the deal on social media, stating negotiators had finalized the wording and that the signing was scheduled for Friday in a location to be determined .
• Field Marshal Asim Munir, Pakistan's influential military leader, was credited by Sharif with playing a crucial role in keeping the talks alive .
• Pakistan was supported by Qatar, Saudi Arabia, Turkey, and Egypt as additional facilitators in the mediation process .

Broader Political Reactions

Israeli Ministers and Opposition

The deal sparked bipartisan outrage in Israel. Figures across the political spectrum labeled it a "catastrophe" and directed their ire at Netanyahu, accusing him of failing to prevent a deal that they argued empowered Iran . Far-right ministers Ben Gvir and Finance Minister Bezalel Smotrich led the charge, calling for continued military pressure in southern Lebanon despite the agreement . Opposition leader Yair Lapid called the outcome a "complete failure by Netanyahu" and a "dangerous turn" for Israel's security, saying the regime survives, the missile program remains in place, and Iran can rebuild its nuclear program . Other opposition figures called it "a diplomatic disaster worse than the 2015 Obama deal" .

G7 Leaders

G7 leaders, meeting in France, offered cautious support for the de-escalation but expressed deep concern over the lack of a binding framework on Iran's missile program and regional proxies. UK Prime Minister Keir Starmer and other leaders emphasized the need for a comprehensive follow-up deal that addresses Iran's nuclear program and ballistic missile capabilities, which were deliberately deferred under this interim agreement .

Iran: Hardliners, Dissidents, and State Media

Inside Iran, the reaction was mixed.

• Hardline factions within the Iranian regime expressed significant last-minute resistance, urging officials to minimize concessions . However, the prevailing sentiment among the leadership was one of victory, with state-controlled media boasting that the US was "forced" into the deal and that Iran had secured major financial relief without sacrificing its nuclear or missile programs .
• Iranian dissidents and opposition groups broadly condemned the agreement, arguing it would provide a financial lifeline to the regime and its proxies (including Hezbollah) without meaningful curbs on its nuclear ambitions or human rights abuses .

Israeli Military and Intelligence

A majority of the Israel Defense Forces (IDF) and Mossad opposed the Memorandum of Understanding, believing Iran should remain under sanctions .

The Bottom Line

The Islamabad Memorandum was a fragile achievement: it reopened the Strait of Hormuz and paused a devastating war, but it deferred every fundamental question to later talks. Iran and the US could not agree on whether Israel had to withdraw from Lebanon. Israel said it would not. Hezbollah welcomed the deal but prepared for more funding. The G7 worried that the hardest problems — Iran's nuclear program, missiles, and regional influence — had simply been postponed. The 60-day negotiating window that followed would determine whether the interim deal became a stepping stone to lasting peace or a prelude to renewed conflict.