Iran has mocked Donald Trump for halting his 'Project Freedom' mission less than 48 hours after it began.
It comes as a French container ship was attacked in the Strait of Hormuz on Tuesday, resulting in injuries among crew members and damage to the vessel.
Iranian state media branded the move as a 'retreat' after the US President's 'continued failures' to use American naval power to reopen the crucial waterway.
'Following Iran’s firm positions and warnings, and the failure of the United States to achieve its objectives in the so-called "Freedom Project", Trump announced the suspension of this project,' said a statement on INSA, an Iranian state-run media outlet.
Trump had launched the new initiative on Sunday to wrest control of the critical waterway from Iran, which effectively closed the strait after the US and Israel started the conflict on February 28.
He said that he made the decision to pause 'Project Freedom' in response to requests from Pakistan and other nations, while claiming progress being made on an agreement with Tehran was also a factor.
A post to Truth Social said: 'Based on the request of Pakistan and other Countries, the tremendous Military Success that we have had during the Campaign against the Country of Iran and, additionally, the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran, we have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom (The Movement of Ships through the Strait of Hormuz) will be paused for a short period of time to see whether or not the Agreement can be finalised and signed.'
The decision came shortly after US Secretary of State Marco Rubio said the initial US-Israeli offensive against Iranian targets, known as 'Operation Epic Fury', was 'over' and that its objectives had been achieved.
Trump said that he made the decision to pause Project Freedom after requests from Pakistan and other nations
In response to the announcement of 'Project Freedom', the Islamic Revolutionary Guard Corps (IRGC) warned that any ship found violating the regime's maritime rules would be stopped by force.
In a rapid escalation of hostilities on Monday, the UAE intercepted 15 missiles and four drones fired from Tehran, while an Iranian attack caused a fire to erupt at the oil port of Fujairah.
The UAE was forced to issue its first missile alert since the fragile ceasefire between the US and Iran was announced last month.
Tehran's decision to launch these attacks officially resumed hostilities between the Islamic Republic and the US in the Middle East.
Meanwhile, a container ship owned by French shipping company CMA CGM was the 'target of an attack' in the crucial waterway, the major shipping firm said on Wednesday.
'The CMA CGM San Antonio was the target of an attack yesterday while transiting the Strait of Hormuz, resulting in injuries among crew members and damage to the vessel,' the shipping firm told AFP, adding those injured had been evacuated for treatment.
Trump has been infuriated by the stalemate but is reluctant to be drawn back into a full-scale conflict amid fears it will exacerbate the crisis in the Strait of Hormuz.
The strait has been virtually shut since the conflict began, blocking about 20 per cent of world oil supplies and igniting a global energy crisis.
Defence Secretary Pete Hegseth insisted Tuesday that the ceasefire is holding - even as he admitted Iranian forces had attacked US troops nearly a dozen times since the pause in fighting.
He told a Pentagon briefing: 'The US aims to protect shipping from Iranian aggression.
'The US won't need to enter Iranian airspace or waters as part of opening the Strait of Hormuz. We're not looking for a fight. They said they control the strait, they do not.'
His remarks came after Iran's chief negotiator warned Tehran has 'not even started' in the battle to control the strait, hours after attacks were traded in the waterway.
Chairman of the Joint Chiefs of Staff General Dan Caine said Iran had 'attacked US forces more than 10 times' since the ceasefire began last month.
Tehran has refused to come back to the negotiating table, even under mounting pressure from the US blockade of its ports.
Vessels in the Strait of Hormuz near Bandar Abbas, Iran, May 4
Speaking to reporters in the White House briefing room, Rubio said the US blockade on Iranian ports would continue until the Islamic regime ceases efforts to prevent free maritime traffic through the Strait of Hormuz through what he described as 'piracy'.
He went on to brand the top brass in the Iranian government as 'insane in the brain'.
'The time has come for Iran to make a sensible choice, and it's not easy for them to do that, obviously, because they have a fracture in their own leadership system,' he said.
Iran has effectively sealed off the strait by threatening to deploy mines, drones, missiles and fast-attack craft. The United States has countered by blockading Iranian ports and mounting escorted transits for commercial vessels.
Hegseth told reporters the Pentagon stands 'locked and loaded' to respond immediately if Trump orders military strikes to resume.
'That option is always there,' Hegseth said of Trump restarting the war. 'And Iran knows that, and that's why, you know, their choices in "Project Freedom" are important.'
A senior US official said that US warships and aircraft protected several commercial vessels from Iranian attacks earlier on Monday as part of 'Project Freedom'.
Sources said an Iranian drone successfully struck a Marshall Islands-linked oil vessel named the JV Innovation while it was attempting to move through the strait.
US warships responded to the drones and cruise missile fire by sinking six small Iranian boats.