Relief over a truce between the United States and Iran has given way to alarm that fighting is still raging across the region as Israel launched its biggest attacks yet on Lebanon and Iran struck Gulf neighbours' oil facilities.
World financial markets rose after US President Donald Trump announced the agreement, two hours before a deadline he had set for Iran to open the Strait of Hormuz or face the destruction of its "whole civilisation".
But even as Israel and the United States paused their attacks on Iran, Israel escalated its parallel war in Lebanon, launching what it described as its biggest strikes yet, sending huge columns of smoke above Beirut as buildings crumpled.
Lebanon's health minister said hundreds had been wounded.
Residents said the Israeli strikes had come without the usual warnings for civilians to leave the area.
Iran's Tasnim news agency cited an unnamed source warning that Iran will withdraw from the ceasefire if attacks on Lebanon continue.
Long after the ceasefire was meant to take effect, Kuwait, the United Arab Emirates and Bahrain all reported new Iranian missile and drone strikes, several of which targeted oil, power and desalination infrastructure vital to the region.
An oil industry source said Saudi Arabia's huge east-west pipeline to the Red Sea had been hit, and damage was being assessed.
The pipeline is the main route by which some oil, at least, has been able to bypass the blockaded strait.
Nevertheless, the Brent crude oil benchmark - which had risen by more than 50 per cent since the war began - was down about 16 per cent on the day overnight, below $US92 a barrel.
US stocks surged to one-month highs, joining a major global relief rally.
Although the United States and Iran both declared victory, their main disputes remained unresolved, each sticking to competing demands for a deal that could shape the Middle East for generations.
The Strait of Hormuz remained largely shut.
A senior Iranian official involved in the discussions told Reuters that could open on Thursday or Friday ahead of peace talks.
But any opening would be conditional on a framework for the ceasefire being agreed, and be "limited" - with ships still requiring Iran's permission to pass.
Pakistani Prime Minister Shehbaz Sharif said he had invited Iranian and US delegations to meet in Islamabad on Friday, and that Iran's president had confirmed his side would attend.
With several of Iran's veteran political leaders killed in the war, Iran's delegation is expected to be led by parliament Speaker and former Revolutionary Guards Commander Mohammad Baqer Qalibaf, with Foreign Minister Abbas Araqchi.
But there was no official confirmation from the US of plans to attend in-person talks.
US Vice President JD Vance, seen as the potential head of a US delegation, said Trump had told negotiators to try to reach an agreement although Vance stopped short of confirming talks at any specific time or place.
In a flurry of online posts, Trump announced new tariffs of 50 per cent on all goods from any country that supplies Iran with arms.
He insisted that Iran had undergone "regime change" and that it would agree not to enrich uranium, which can be used in nuclear warheads.
Defense Secretary Pete Hegseth said the US had won a decisive military victory, and that Iran's missile program had been functionally destroyed.
Crowds took to the streets of Iran overnight to celebrate, waving Iranian flags and burning flags of the United States and Israel.
"The enemy, in its unjust, illegal and criminal war against the Iranian nation, has suffered an undeniable, historic and crushing defeat," Iran's Supreme National Security Council said in a statement.
If peace talks open on Friday in Islamabad as announced, they will begin with the main demands of the warring sides unresolved.
The US has presented its demands in a 15-point plan while Iran has responded with a 10-point plan of its own.
