The U.S. and Iran agreed to a deal to end hostilities on Sunday, Pakistani Prime Minister Shehbaz Sharif announced, with an official signing ceremony expected on Friday, and more detailed nuclear negotiations to follow.President Trump confirmed the news and said he was now lifting the U.S. blockade, with Iran expected to open the Strait of Hormuz.Why it matters: The deal is expected to extend the ceasefire by 60 days, reopen the strait and launch nuclear talks after 107 days of war.The memorandum of understanding would mark the biggest diplomatic breakthrough of the war and buy time to settle the hardest questions over Iran's nuclear program.The agreement was expected to be signed electronically on Sunday after mediation by Pakistan and Qatar, but it's unclear if that has happened.Sharif and Iranian officials said the signing ceremony would be Friday in Switzerland.The big picture: If it holds, the deal could ease the global energy shock the war set off. The agreement is designed to restore shipping through the Strait of Hormuz, which before the war handled about 20% of global oil and liquefied natural gas. But it leaves key nuclear issues to be negotiated over the next two months.Reopening the whole strait may not be immediate in practice. Mine-clearing, repairing infrastructure and guaranteeing security could take time before a full return to pre-war shipping volumes.Breaking it down: The agreement calls for the U.S. and Iran to negotiate over Iran's nuclear enrichment and the disposal of its highly enriched uranium during the 60-day window.The U.S. will commit to discuss sanctions relief and the release of frozen Iranian funds, with relief expected to be tied to Iran's compliance.The ceasefire covers fighting between Israel and Hezbollah in Lebanon, which flared up again on Sunday.State of play: The agreement comes after a volatile final stretch. Israel struck Hezbollah targets in Beirut hours before the expected signing, prompting Iranian threats to walk away from the deal.Iran made operational preparations for an attack on Israel, according to U.S. and Israeli officials.U.S. negotiators, together with Qatari and Pakistani mediators, scrambled to avoid an Iranian attack on Israel that would likely have generated a harsh Israeli response and potentially detonate the deal. Iranians officials ended up holding off, and the deal was announced.What they're saying: "The Deal with the Islamic Republic of Iran is now complete. Congratulations to all! I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines," Trump wrote on Truth Social.That came minutes after Sharif posted on X that "the Peace Deal between the United States of America and Islamic Republic of Iran has been REACHED. Both sides have declared the immediate and permanent termination of military operations on all fronts, including in Lebanon."Sharif added that the deal was "now in place."Iran's deputy foreign minister Kazem Gharibabadi told Iranian media that the text of the memorandum of understanding had been finalized.He said the end of the U.S. naval blockade would begin Sunday night. "The immediate and permanent end of the war and military operations on various fronts, including Lebanon, will be announced starting tonight," Gharibabadi said.Some of the revisions Tehran asked to make in the text of the MOU were accepted after the escalation in Lebanon on Sunday, he added. Gharibabadi said the threats issued by Iran's armed forces "helped facilitate progress in the negotiations.""The armed forces were prepared to deliver a decisive response. It contributed to finalizing the text, and advanced several issues that remained unresolved in the negotiations," he said.Gharibabadi said the negotiations over the text continued until around 5pm ET. Fifteen minutes later, Sharif issued his statement announcing the deal.What's next: Sharif said Pakistan and the other mediators would "facilitate a series of meetings this week," to be followed by technical talks.The sides have given themselves 60 days to reach a technical agreement on how to downblend Iran's highly enriched uranium and both freeze and monitor Iran's nuclear program going forward. That's a tall order given how difficult it was to reach the much less detailed memorandum of understanding. The U.S. side insists Iran is incentivized to reach a final agreement because sanctions relief and access to frozen funds depend on progress on the nuclear front. Some hawks in the U.S. and Israel worry there will never be a final deal and the war will end with the nuclear questions unresolved.Editor's note: This story has been updated with additional details throughout.