"In response to my sincere invitation, the leaderships of both countries are coming to Islamabad. There, negotiations will be held for the establishment of peace", Sharif said in an address to the nation.

While US Vice President JD Vance was on his way to Pakistan, there had been a question mark over the Iran delegation after Tehran set conditions for the start of negotiations.

The Islamic republic has said a two-week ceasefire in place must apply to Lebanon, where Israel was still carrying out bombing raids on Iran-backed Hezbollah.

Iran also called for its assets frozen abroad because of US sanctions to be unblocked.

Sharif sounded a more positive note, thanking both sides for agreeing to meet, but said the hard work was still to come.

"A temporary ceasefire has been announced, but now an even more difficult stage lies ahead: the stage of achieving a lasting ceasefire, of resolving complicated issues through negotiations," he said in his televised speech.

"This is that stage which, in English, is called the equivalent of 'make or break'."

He said his government would "make every possible effort to make these talks successful".

On a domestic note, Sharif announced a more than 30 percent cut in the price of diesel, from 520 to 355 rupees per litre, and a slight cut to petrol prices.

Pakistan had hiked prices just over a week ago in response to spiking global energy prices caused by the Iran war.