Israel began the process of withdrawing troops from Gaza while the U.S. started the clock on a 72-hour window for Hamas to release all remaining hostages, as the complex process of ending the two-year war got underway.

Israeli forces retreated on Friday to a so-called yellow line as laid out in a plan unveiled by U.S. President Donald Trump late last month, with fighting suspended as per an agreement reached early Thursday. Attention now switches to Hamas, which is due to free the 20 abductees who are believed to be still alive, plus the remains of those who are dead, within the pre-agreed timeframe.

Trump has said the hostages will be released on Monday or Tuesday. He is expected to go to Israel for the handover. U.S. Middle East envoy Steve Witkoff confirmed Friday the 72-hour grace period had begun.

The developments mark the early steps in the most significant diplomatic breakthrough in the Israel-Hamas war since the conflict started just over two years ago, sparking relief and some celebrations in both Israel and the Gaza. The war has killed tens of thousands of people and devastated the Palestinian territory of more than 2 million people, while destabilizing the wider Middle East.

Israel is due to release almost 2,000 Palestinian prisoners in exchange for the hostages taken in the October 2023 attacks that triggered the war, and their identities are still being finalized. Marwan Barghouti, one of the more high-profile candidates who has been touted as a potential leader of a Palestinian state some day, is not expected to be among them, AP reported. He’s been imprisoned by Israel for more than two decades.

Israeli Prime Minister Benjamin Netanyahu’s coalition gave its approval to the peace deal overnight, around a day after negotiators for the warring sides reached an agreement in the Egyptian resort of Sharm El-Sheikh. The terms were mediated by the Americans, as well as Egypt, Qatar and Turkey.

Witkoff and Jared Kushner, the president’s son-in-law, were there for the final stages of the negotiations.

As part of the deal, the Israeli government will allow for a ramp up of aid through United Nations agencies and other international bodies.

“We and our partners are prepared to move – now,” UN Secretary-General Antonio Guterres said on Thursday. “We have the expertise, the distribution networks, and community relationships in place to act.”

While a ceasefire is officially in place in most of Gaza, fighting was reported in some areas on Thursday, with Israeli forces striking a Hamas cell in northern Gaza and the Palestinian militant group saying four people were killed. It wasn’t clear if they were citing the same incident.

The Israeli army said a soldier was killed by sniper fire in northern Gaza on Thursday afternoon.

Broadly, Israelis and Palestinians have welcomed the agreement. Most Gazans have been displaced during a conflict that’s killed more than 67,000 of them, according to the Hamas-run health ministry there. Israel has lost more than 450 troops in combat.

The negotiators still have plenty of challenges to overcome to ensure the ceasefire is sustained. Hamas — designated a terrorist organization by the U.S., European Union and others — has yet to agree to lay down its arms or officially say it will have no part in Gaza’s future governance, which Trump’s plan specifies.

There’s little clarity on who will run Gaza next. The U.S.’s 20-point proposal says a “Board of Peace,” chaired by Trump and including former UK Prime Minister Tony Blair, will oversee a technocratic committee of Palestinians that will be responsible for public services.

Still, the U.S., European states, the Arab world and Turkey have all hailed the deal as the best opportunity yet to end the conflict, which Hamas triggered with its Oct. 7, 2023 attack on Israel, killing 1,200 people and abducting another 250.

Israeli assets have gained on the prospects of peace. The Israeli shekel is at a three-year high and up 1.2% against the dollar this week, one of the best performances globally. Israeli bonds and stocks have also risen.

Two senior U.S. officials, speaking to reporters on condition of anonymity on Thursday night, said there were two phases to the deal — the hostage release and then what they called “almost a permanent ceasefire” where other issues have to be resolved. Those include decommissioning Hamas’s weapons, forming Gaza’s new government and the full redeployment of Israeli forces.

U.S. Central Command, which oversees American forces in the Middle East, will have 200 troops on the ground to observe the implementation of the Gaza ceasefire agreement, according to the U.S. officials.

The U.S. acknowledges there are a lot of ways the deal could go wrong. But Trump is optimistic about expanding the Abraham Accords, signed in his first term and which saw countries such as the United Arab Emirates and Bahrain normalize ties with Israel. The war and the suffering of Palestinians have enraged Arab countries, including Saudi Arabia. The kingdom was close to formally recognizing Israel on the eve of the conflict.

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

Still, it called on the U.S. and others to ensure Israel doesn’t break any terms, signaling its wariness.

The conflict has had ramifications far beyond Gaza, with Israel attacking Iran-backed militias in Lebanon, Syria, Yemen and Qatar. It also fought a 12-day aerial war against Iran in June, which saw the U.S. strike the Islamic Republic’s nuclear sites.

A UN-backed monitor declared a famine in parts of Gaza, while another panel supported by the New York-based organization said Israel was committing genocide, something Netanyahu’s government denies.

Israel’s isolation has grown the longer the war has carried on. Many key allies, including the UK, France and Canada, defied it by recognizing Palestinian statehood around two weeks ago. Some members of the EU, Israel’s largest trading partner, have called for sanctions on the country’s government.

In an interview with Fox this week, Trump said he told Netanyahu that Israel “cannot fight the world — and he understands that very well.”

_____

©2025 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.