Israel and Hamas reached a deal for a truce and the release of all hostages held by the militant group in Gaza, a major step toward ending a two-year war that’s devastated the Palestinian territory, destabilized the Middle East and sparked global protests.

Israeli Deputy Foreign Affairs Minister Sharren Haskel told Bloomberg TV a ceasefire is in effect as of Thursday.

The agreement was secured overnight after days of indirect negotiations between the warring sides in the Egyptian resort of Sharm El-Sheikh. The talks, still ongoing, are being brokered by the U.S., Egypt, Qatar and Turkey and based on a plan unveiled by U.S. President Donald Trump early last week.

“I am very proud to announce that Israel and Hamas have both signed off on the first Phase of our Peace Plan,” Trump said in a social media post. All the roughly 20 live hostages held in Gaza, plus the remains of those who have died in captivity, will be freed “very soon” and Israeli forces will “withdraw their Troops to an agreed upon line as the first steps toward a Strong, Durable, and Everlasting Peace,” the U.S. leader said.

Israel and Hamas both confirmed the deal. Crowds began gathering on Thursday morning in Hostages Square in Tel Aviv — a focal point for Israeli demonstrators calling for their release — in anticipation of a handover. There were also celebrations in Deir al-Balah in central Gaza, according to witnesses.

An Israeli official said the plan would start to be implemented from midday local time, with the army beginning to withdraw from their positions in the following 24 hours. The security Cabinet will meet at 5 p.m. and the full Cabinet shortly after to formally approve the agreement, the official said, asking not to be identified by name discussing sensitive matters.

Israel’s equity benchmark posted the world’s second-biggest advance, while its currency and sovereign dollar bonds rallied the most among emerging-market peers, as investors cut risk premiums on the country. The shekel climbed to a three-year high.

As part of the agreement, Israel is slated to release almost 2,000 jailed Palestinians and allow a ramp up of aid to Gaza through United Nations agencies and other international bodies. Israeli forces will withdraw in steps until they reach a buffer zone just within Gaza’s border. The Israel Defense Forces said Thursday it had begun “operational preparations” to “transition to adjusted deployment lines.”

The talks in Sharm El-Sheikh are likely to continue over outstanding issues, including the reconstruction and future governance of Gaza. Trump and Israeli Prime Minister Benjamin Netanyahu have demanded that Hamas disarms and have no part in governing the territory. The group, designated a terrorist organization by the U.S., European Union and others, is yet to agree to that.

Netanyahu, whose government has long sought the total destruction of Hamas, hailed “a national and moral victory for the State of Israel.” He said he had a “very emotional and warm conversation” with Trump in which they congratulated each other on the “historic achievement.”

International leaders, including from Germany and the U.K., welcomed the breakthrough. Many have denounced Israel’s campaign in Gaza and in some cases moved to recognize a Palestinian state in response. French President Emmanuel Macron, who has repeatedly clashed with Netanyahu over the conflict, said the “agreement must mark the end of the war and the beginning of a political solution.”

Hamas said the deal amounted to an “end to the war on Gaza” and will “ensure the withdrawal of the occupation forces,” according to a statement on Telegram. It thanked the mediators and, in a notable shift in tone, said it valued “the efforts of U.S. President Donald Trump.”

The group called on Trump to ensure Israel sticks to the terms and added it would “never relinquish our people’s national rights until freedom, independence, and self-determination are achieved.”

Hamas triggered the conflict with an attack on southern Israel on Oct. 7, 2023, killing 1,200 people and abducting another 250. More than 67,000 Gazans have been killed in the ensuing war, according to the Hamas-run health ministry. A panel backed by the U.N. said Israel was committing genocide, something Netanyahu’s government denies. A U.N.-backed monitor declared a famine in parts of the territory.

Some 450 Israeli troops have died in combat in Gaza.

The conflict had ramifications beyond Gaza, with Israel exchanging fire with regional foes since the start of the war. That included a 12-day aerial war against Iran in June, which saw the U.S. strike the Islamic Republic’s nuclear sites.

There have been regular demonstrations in the U.S., Europe and Muslim world, with Israel increasingly isolated. Some members of the E.U., Israel’s main trading partner, have called for sanctions against the country. In his interview with Fox, Trump said he told Netanyahu that Israel “cannot fight the world — and he understands that very well.”

If the agreement holds, it would be a diplomatic victory for Trump and may even boost his campaign to win the Nobel Peace Prize. This year’s winner is announced on Friday, though the Norwegian Nobel Committee has indicated any peace resolution in the Middle East will only be reflected in future prizes.

Trump said he might go to the Middle East on Saturday or Sunday, telling Axios that could include a trip to Israel.

Next steps

Hamas’ team in Egypt is headed by Khalil Al-Hayya, who Israel tried to assassinate less than a month ago with a missile strike on Qatar. The attack, which killed other Hamas members and a Qatari security guard, angered Arab states and frustrated the U.S., with Trump pledging not to allow Israel to carry out similar actions again.

Following that strike, Trump met Arab officials in New York, with the discussions proving crucial to getting the U.S. to the point of proposing a peace plan likely to be accepted by both sides.

Trump unveiled his 20-point proposal on Sept. 29 at the White House alongside Netanyahu. The plan — which may change in light of those discussions — says Gazans will be encouraged to stay, moving away from the U.S. president’s highly-controversial idea of driving the Mediterranean land’s two million people into exile.

Trump’s plan doesn’t say a solution establishing a Palestinian state is needed, but recognizes “self-determination and statehood” are “the aspiration of the Palestinian people.”

While the deal is a first step toward what Trump has said he hopes is a lasting peace between Israel and the wider Arab world, many questions remain about whether a ceasefire can hold.

“There’s plenty of reason to be skeptical here about whether this would not make it past its initial stage,” said Yousef Munayyer, head of the Palestine/Israel Program and senior fellow at the Arab Center Washington DC.

Finalizing the roster of Palestinian prisoners to be released could prove protracted. Some members of Netanyahu’s coalition, the most right-wing and religious in Israel’s history, will likely oppose the inclusion of planners of suicide bombings or of Palestinians who took part in the Oct. 7 attack.

Israeli Finance Minister Bezalel Smotrich, said he won’t vote in favor of the deal, though stopped short of threatening to quit the government.

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—With assistance from Fadwa Hodali, Ott Ummelas and Srinivasan Sivabalan.

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