Shaky US-Iran Ceasefire in Doubt as Israel Pounds Lebanon 

* Ceasefire fails to halt Israel-Hezbollah fighting, Israeli strikes kill 254 in Lebanon

* US, Iran declare victory but core disputes unresolved, Strait of Hormuz remains restricted

* Financial markets rally on truce, oil prices drop 14%, stock markets surge

* US and Iran set for talks in Pakistan as the nations dispute nuclear terms

By Steve Holland, Parisa Hafezi, Alexander Cornwell and Maya Gebeily

WASHINGTON/DUBAI/TEL AVIV/BEIRUT, April 8 (Reuters) – Israel pounded Lebanon with its heaviest strikes yet on Wednesday, killing hundreds of people and drawing a threat of retaliation from Iran, which said the attacks violated a ceasefire deal agreed with the United States a day earlier.

Iran and the United States, meanwhile, laid out sharply contrasting agendas for talks that aim to forge a more durable peace in the region. Those talks, due to take place in Pakistan on Saturday, will be led by U.S. Vice President JD Vance and Iran’s parliament speaker Mohammad Baqer Qalibaf and Foreign Minister Abbas Araqchi.

Both Iranian officials questioned whether the ceasefire could hold, saying the ceasefire agreement had been undermined by Israel’s continued attacks on Lebanon, where Israel has been pursuing a parallel war with the Iran-aligned militia Hezbollah.

“The U.S. must choose – ceasefire or continued war via Israel. It cannot have both,” Araqchi wrote on social media.

Israel and the United States both said the two-week ceasefire did not cover Lebanon, and Israeli Prime Minister Benjamin Netanyahu said the strikes would continue.

U.S. President Donald Trump announced the ceasefire late on Tuesday, two hours before a deadline he had set for Iran to open the blockaded Strait of Hormuz or face the destruction of its “whole civilisation.”

Though both the United States and Iran declared victory in a five-week-old war that has killed thousands, their core disputes remained unresolved. Each side is sticking to competing demands for a deal that could shape the Middle East for generations.

Iran’s nuclear ambitions also remain a sticking point. Trump said Iran had agreed to stop enriching uranium, which can be turned into nuclear warheads, and the White House said Iran has indicated it would turn over its existing stocks.

“The United States will, working with Iran, dig up and remove all of the deeply buried… Nuclear ‘Dust,” Trump said on social media.

Qalibaf, however, said it was allowed to continue enriching uranium under the terms of the ceasefire.

Despite the uncertainty, world stock indexes surged while oil prices plunged 14% to settle near $95 per barrel, after falling as low as $90.40.

Benchmark Brent crude remains roughly $25 higher than before the joint U.S.-Israel attacks began. Tehran’s newly demonstrated ability to cut off Gulf energy supplies through its grip on the strait, despite decades of massive U.S. military investment in the region, shows how the conflict has already altered power dynamics in the Gulf.

‘FINGER ON THE TRIGGER’

Netanyahu said Israel had achieved many of its objectives in the war with Iran, but stressed that Israel had its “finger on the trigger” and was prepared to return to fighting at “any moment.”

Iran’s Tasnim news agency cited an unnamed source warning that Iran will withdraw from the ceasefire if attacks on Lebanon continue.

Lebanon’s civil defence service said 254 people had been killed in Israel’s strikes across Lebanon on Wednesday. The highest toll was in the capital Beirut, where Israeli strikes killed 91 people, it said. Residents said some of the Israeli strikes had come without the usual warnings for civilians to evacuate.

Iran also struck oil facilities in nearby Gulf countries, including a pipeline in Saudi Arabia that has been used to bypass the blockaded Strait of Hormuz, according to an oil industry source. Kuwait, ​Bahrain and the UAE also reported missile and drone strikes.

The Strait of Hormuz remained shut to vessels sailing without a permit and shippers said they needed more clarity before resuming transit. MarineTraffic data showed two Greek-owned and two Chinese-owned bulk carriers have passed through the strait since early Wednesday.

In a flurry of online posts, Trump announced new tariffs of 50% on all goods from any country that supplies arms to Iran.

IRAN’S RULING ESTABLISHMENT SURVIVES

Crowds took to the streets of Iran overnight to celebrate, waving Iranian flags and burning those of the United States and Israel. But there was also wariness that a deal would not hold.

“Israel will not allow diplomacy to work and Trump might change his view tomorrow. But at least we can sleep tonight without strikes,” Alireza, 29, a government employee in Tehran, told Reuters by phone.

The war was launched on February 28 by Trump and Netanyahu, who said they aimed to prevent Iran from projecting force beyond its borders, end its nuclear programme and create conditions for Iranians to topple their rulers. U.S. Defense Secretary Pete Hegseth on Wednesday said Washington had won a decisive military victory.

But so far Iran retains both its stockpile of near-weapons-grade highly enriched uranium and its ability to hit its neighbours with missiles and drones. The clerical leadership, which faced mass protests months ago, has withstood the superpower onslaught with no sign of internal collapse.

“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.

(Reporting by Reuters bureaus worldwide; Writing by Andy Sullivan, David Dolan, Peter Graff and Keith Weir; Editing by Kevin Liffey, Keith Weir, Ros Russell and David Gaffen)