Pakistan’s emergence as a mediator in the U.S.-Iran peace process is giving Islamabad a diplomatic dividend it has rarely enjoyed in recent years: public praise from Washington, a direct channel to Tehran and a chance to position itself as a stabilizing actor in a crisis that has affected energy markets, shipping routes and U.S. security interests across the Middle East.

The immediate backdrop is the Islamabad Memorandum of Understanding, which Pakistani officials say was electronically signed by the United States and Iran on June 18 and followed by a high-level meeting in Burgenstock, Switzerland, on June 21. Pakistan and Qatar acted as mediators at the Swiss session, which included Pakistani Prime Minister Shehbaz Sharif, Pakistan’s military chief Field Marshal Asim Munir, U.S. Vice President JD Vance, Iranian parliamentary speaker Mohammad Bagher Ghalibaf and Qatari Prime Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani, according to Pakistan’s Foreign Ministry.

Islamabad’s foreign office said the Swiss meeting produced several follow-up steps: a high-level committee for political oversight, working groups on nuclear issues and sanctions, a monitoring and dispute-resolution process, a 60-day roadmap toward a final deal, a communication line intended to avoid maritime incidents in the Strait of Hormuz and a deconfliction cell involving Lebanon. Pakistani officials said a technical-level meeting was held on June 22 and that teams from Pakistan and Qatar would remain engaged with U.S. and Iranian counterparts in the coming weeks.

For Pakistan, the diplomatic value is clear. It has spent months trying to serve as a communication channel between two adversaries that have few direct avenues for trust. That role gives Islamabad visibility in Washington at a time when U.S.-Pakistan relations have been narrower than during earlier periods of security cooperation. It also gives Pakistan a way to reassure Iran, its western neighbor, that it is not simply operating as an extension of U.S. or Gulf policy.

The U.S. relevance is equally direct. Washington’s regional agenda depends not only on nuclear constraints and sanctions enforcement but also on maritime security, Gulf energy stability, Israel-Lebanon de-escalation and managing Iran’s regional reach. Pakistan cannot decide those outcomes alone, but it can help create channels that reduce the risk of miscalculation. In that sense, Islamabad’s value to Washington is less about formal alliance structures and more about access, timing and credibility with multiple sides.

The economic case for Pakistan is more complicated. Al Jazeera reported that Pakistan recorded 3.7 percent GDP growth over the past financial year, its fastest pace in four years, and that remittances rose 8.2 percent to $30.3 billion. Those numbers give the government room to argue that diplomacy can support recovery. But Pakistan remains under a $7 billion International Monetary Fund program, and economists cited by the outlet cautioned that reduced energy-import costs and possible Iran trade gains would not automatically fix deeper structural weaknesses.

Energy is the most visible potential benefit. Pakistan is a major energy importer, and any durable easing of tensions around the Strait of Hormuz could reduce pressure on import bills and inflation expectations. The strait is also central to U.S. concerns because disruption there affects global oil and liquefied natural gas flows. Pakistani officials said they support restoring the pre-crisis status quo for navigation through the waterway while allowing regional states to work through legal and operational questions.

Sanctions relief could also reopen discussion of economic links between Pakistan and Iran. The Iran-Pakistan gas pipeline has been stalled for years under sanctions pressure, and border trade through Balochistan has been constrained by security risks, regulatory uncertainty and financial restrictions. Pakistan’s Foreign Ministry said broad trade, energy, border security, people-to-people and regional connectivity issues were discussed during Iranian President Masoud Pezeshkian’s visit to Pakistan after the Swiss talks, while cautioning that progress on specific projects would depend on the pace of sanctions relief.

That caveat matters. A peace process can create diplomatic space, but it does not erase the legal, financial and political constraints that have long limited Pakistan-Iran commerce. U.S. sanctions relief may be temporary, conditional or limited to specific sectors. European and other sanctions regimes may also remain relevant. Pakistani officials have acknowledged that trade and connectivity projects will move in parallel with broader decisions on sanctions, not ahead of them.

The process also carries domestic political implications inside Pakistan. Munir’s prominent role at the Swiss meeting and the public attention from U.S. officials have reinforced the Pakistani military’s central place in foreign policy. Pakistan’s army has ruled the country directly for long periods and continues to wield significant influence over diplomacy and national security. That may make mediation more efficient in crisis talks, but it also raises familiar questions about whether diplomatic gains strengthen civilian institutions or further consolidate military influence.

Balochistan is another test. The province borders Iran and would be central to any increase in trade, pipeline movement or border connectivity. It is also Pakistan’s poorest province and has faced a long-running insurgency. If cross-border commerce expands but local communities see little benefit, Islamabad could face greater tension in the very region that would be expected to carry much of the economic upside.

Pakistan’s balancing act with Gulf states is also delicate. Islamabad has close economic, labor and security ties with Saudi Arabia, Qatar and other Gulf partners, while Iran remains a neighbor with direct border and security interests. Pakistan’s coordination with Qatar, and its outreach to Egypt, Saudi Arabia and Turkiye through regional diplomacy, appears designed to prevent its mediation from being seen as a unilateral move toward Tehran. That broader coalition gives Islamabad cover, but it also limits how far Pakistan can tilt toward any one side.

The next phase will test whether Pakistan’s role is procedural or substantive. Technical talks are expected to continue, including work on nuclear issues, sanctions, monitoring and implementation. Pakistan can help keep parties at the table and reduce misunderstandings, but it is unlikely to dictate the terms of a final U.S.-Iran settlement. Its influence depends on whether Washington and Tehran continue to see Islamabad as useful — and whether the process produces practical relief rather than symbolic statements.

For now, Pakistan has gained what it most urgently needed: relevance. It has placed itself at the center of a U.S.-Iran channel with consequences for energy markets, maritime security and regional conflict management. The larger question is whether Islamabad can turn that diplomatic moment into durable economic gains at home, without overpromising what mediation can deliver.