Iran delayed the start of negotiations over a permanent peace deal with the U.S. after fighting intensified in southern Lebanon, a potential setback to U.S. President Donald Trump’s efforts to end the war and curb Tehran’s nuclear program.

The talks, which were meant to take place in Switzerland on Friday, were pushed off because of those clashes between Israel and Iran-backed Hezbollah militants, according to two people familiar with the situation, who asked not to be identified due to the sensitivity of the matter.

Israel and Hezbollah agreed to a ceasefire later Friday, according to a U.S. official, who asked to remain anonymous because the agreement isn’t public. Both sides said they would commit to a truce if the other side does the same, but would respond otherwise.

Iran insisted on a ceasefire in Lebanon as part of the interim peace deal finalized with the U.S. this week, and didn’t send a delegation to the talks as a result of the fresh hostilities. U.S. Vice President JD Vance, who was to represent Washington, also didn’t travel.

There’s as yet no indication of a new start date for the discussions.

The postponement represents a blow to Trump, who signed a memorandum of understanding with Iran on Wednesday despite widespread criticism he was conceding too much in terms of financial benefits and relief from sanctions. He said the agreement would prevent a global economic crisis, given the critical Strait of Hormuz would reopen to oil and gas shipments.

“We didn’t meet out of desperation, Iran did. They are FINISHED!” Trump posted on Truth Social on Friday. “We’ll play out the 60 days. They get no money, not ten cents!”

Later Friday, he said the two sides still have time to make a deal.

“Otherwise, we will do things that won’t make them happy, but I don’t think it’s going to get to that,” he said in remarks at Joint Base Andrews, where he was unveiling the new Qatar-gifted jet that will serve as Air Force One. “I think it’s going to be very good.”

It’s not yet clear if the latest developments will affect the strait, where maritime activity has picked up since Trump and Iranian counterpart Masoud Pezeshkian signed the agreement. Traffic through the waterway — critical for global energy supplies —- appeared to thin early Friday, a day after a surge in renewed oil flows as the two countries vowed to lift a dual blockade.

Iran said Friday that ships that cross the Strait of Hormuz will need its permission, setting the stage for a likely contentious debate over future tolling arrangements.

Vessels that cross the strait will need a mandatory insurance policy that is currently free but could have a cost in the future, the country’s Persian Gulf Strait Authority said in a document on its website. The U.S., Europe and Gulf Arab states have balked at the idea of Iran imposing fees on the transit point, and Vance downplayed the possibility on Thursday.

“We believe international waterways should be free of tolls,” he said, noting that the countries in the region “together will figure out a proper security framework for the strait in the future.”

Oil was rose slightly on Friday, with Brent up about 0.9% to $80 per barrel. Prices have still dropped about 7.7% this week, with traders anticipating the reopening of Hormuz Strait will ease the biggest energy-supply crunch in history.

The fighting in Lebanon was deadlier than usual, with the Israeli military saying four of its soldiers were killed, including a battalion commander. Israel’s attacks killed 18 people, Lebanon’s state-run National News Agency reported, while the Israeli military said it targeted 80 Hezbollah sites.

Iran sees the U.S. as having “direct responsibility” for the situation in Lebanon and Israel’s military actions, foreign ministry spokesman Esmail Baghaei said in statement cited by state-run Islamic Republic News Agency.

Strains between the U.S. and Israel over Lebanon are growing. Trump has sworn at Israeli Prime Minister Benjamin Netanyahu in calls, accusing him of almost scuppering this week’s memorandum with Iran by escalating strikes in Lebanon. Israel insists it will keep troops across its borders until it’s sure Hezbollah, designated a terrorist organization by the U.S., is no longer a threat.

Trump told Axios in an interview taped Thursday that aired Friday that he has a good relationship with Netanyahu but that he has to “keep him a little bit sane.” He added that he can prevent Israel from attacking Lebanon because “they have a lot of respect for me, and they do as I say.”

Israel will not tolerate attacks on its soldiers or territory, and will exact a “very heavy price” from Hezbollah in response, Netanyahu said in a post on X on Friday. “Israel will remain in the security zone in southern Lebanon for as long as required to protect the communities in the north,” he said.

Sixty-seven percent of Israelis believe the U.S.-Iran deal is bad for their country, according to a poll aired on Israel’s top-rated Channel 12 TV. Nine percent believe it’s good for Israel, and 24% are undecided.

Lebanese President Joseph Aoun said the latest Israeli escalation is undermining the ceasefire efforts.

Switzerland’s foreign ministry said it “remains ready to facilitate these talks,” and that “the relevant preparatory work” at the host resort of Burgenstock is continuing.

A White House spokesperson said an American delegation is prepared to depart at the first available opportunity.

The U.S.-Iran memorandum signed on Wednesday has led to Washington lifting a naval blockade of Iranian ports and Iran saying it will reopen the Strait of Hormuz. They have agreed to extend their ceasefire during the new round of talks, which are meant to finish within 60 days but can be extended.

The sides will try to agree on restricting Iran’s processing of uranium, possibly for a decade or more, and destroying or diluting its existing stocks of highly-enriched uranium.

The U.S. and Israel started bombing Iran on Feb. 28, saying they needed to stop the country building an atomic weapon. Tehran’s long denied wanting to do that but has enriched uranium to far beyond the levels needed for nuclear power plants.

The war caused energy prices to soar and pushed up inflation globally, while U.S. allies such as the United Arab Emirates and Qatar were targeted with thousands of Iranian drones and missiles.

Many atomic experts say 60 days won’t be enough to work out a permanent deal with Iran, given the complex and technical nature of the topic. A 2015 nuclear accord between Iran and world powers including the U.S., which Trump regularly derides and abandoned during his first term, took about two years to complete.

Crude prices remain roughly 30% higher for the year because it will take months, if not longer, for oil and liquefied natural gas flows through Hormuz to return to normal. Moreover, the U.S. and many other countries have run down emergency petroleum stockpiles at a record rate to keep a lid on prices during the war. Those will have to be replenished, which will add to global demand.

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With assistance from Bastian Benrath-Wright, Omar Tamo, Courtney Subramanian, Jennifer A. Dlouhy, Alisa Odenheimer, Jon Herskovitz, Dan Williams and Kate Sullivan.

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