“After a long night of talks mediated by the United States, I am pleased to announce that India and Pakistan have agreed to a FULL AND IMMEDIATE CEASEFIRE,” US President Donald Trump posted on Truth Social Saturday. The governments of both Asian nations will start negotiations on a broad set of issues at a neutral site, US Secretary of State Marco Rubio said on X.

The ceasefire comes after the Indian and Pakistani militaries targeted each others’ bases, fueling fears of an all-out war. World powers including China, Saudi Arabia, and the Group of Seven nations had urged the countries to engage in dialog after dozens of civilians on either side of the border were killed in a series of tit-for-tat attacks.

Chief Minister of Jammu and Kashmir Omar Abdullah said in an X post that explosions were heard in the northern Indian state’s capital Srinagar just hours after both nations agreed to maintain a ceasefire.

Tensions first erupted on April 22, when gunmen killed 26 civilians — mainly tourists — in India’s Jammu and Kashmir region. India called the attack an act of terrorism and accused Pakistan of involvement, allegations Islamabad has denied.

This week, the situation escalated dramatically when India carried out an operation against what it described as terrorist camps inside Pakistan. The strikes on nine targets, which Pakistan’s army said killed 31 civilians, were the deepest breach of Pakistani territory by India since the 1971 war. Pakistan then said it shot down five Indian planes — a claim New Delhi hasn’t yet addressed — and both sides launched drone and missile strikes into each other’s territory.

Indian Foreign Minister S. Jaishankar confirmed the ceasefire, saying on X that “India has consistently maintained a firm and uncompromising stance against terrorism in all its forms and manifestations. It will continue to do so.” In a subsequent press briefing, India’s military denied reports that its Russian-made S-400 missile defense system was hurt by Pakistan’s Chinese-made fighter jets, and said Indian forces destroyed several Pakistani assets.

Pakistan’s Deputy Prime Minister Ishaq Dar echoed the ceasefire confirmation, saying “Pakistan has always strived for peace and security in the region, without compromising on its sovereignty and territorial integrity.” Prime Minister Shehbaz Sharif is due to address the nation on Saturday.

“Both sides will claim victory now to their own audiences,” said Manoj Joshi, fellow at the Observer Research Foundation. “What is the reality will be hard to know.”

India didn’t publicly acknowledge the US mediation efforts or Trump’s role in the same, while Pakistan’s Sharif did.

Read More: What’s Behind the Enduring India-Pakistan Conflict?: QuickTake

The conflict had roiled financial markets. India’s NSE Nifty 50 Index slid over 1% on Friday, its biggest drop in more than a month. Pakistan’s key stock index is down 9% since the attack in Kashmir but rose on Friday before the International Monetary Fund approved a $1 billion loan.

The Indian rupee weakened 1% against the dollar since India’s initial strikes on Wednesday, with the currency ranking among the worst performers in Asia and seemingly forcing the central bank to intervene to curb excessive volatility. Bonds fell too, with the 10-year yield rising 3 basis points to 6.38%, though further declines were limited by debt purchases by the monetary authority.

“The ceasefire should augur well for FX and rates markets, which were hammered in a kneejerk way,” said Madhavi Arora, an economist at Emkay Global Financial Services Ltd. “We may still see a mild increase in defense spending overall in this fiscal year as India replenishes it’s defense arsenal. But that would not really hit the fiscal math materially.”

After the announcement of the ceasefire, Pakistan reopened its airspace to resume flight operations that were at a standstill nationwide, according to the nation’s airports authority.

There is however no clarity on whether the two countries will roll back some of the diplomatic measures announced since the Kashmir attack. These include India’s suspension of a crucial water-sharing treaty, the withdrawal of envoys, and visa restrictions.

Pakistan’s Director General of Military Operation will next speak with his Indian counterpart at noon on May 12, India’s Foreign Secretary Vikram Misri said in a statement. 

Pakistan and India have clashed several times over the disputed region of Kashmir since independence from Britain in 1947. The last time the two nations came close to an all-out war was in 2019, after a suicide bomber killed 40 members of India’s security forces.

“None of India and Pakistan’s long-standing disputes will resolve any time soon,” said Hasnain Malik, a strategist at Tellimer in Dubai. “But the mutual nuclear deterrent and unwillingness of global powers to fan the flames has again demonstrated that there is a limit to how far a hot conflict can escalate.”