Iran has signalled cautious optimism over its recent memorandum of understanding (MoU) with the United States, even as the country mourns the death of former Supreme Leader Ayatollah Ali Khamenei. Senior Iranian officials acknowledged that implementing the agreement would be challenging but maintained that diplomacy remained possible despite deep differences between the two countries.

Speaking in Tehran on Monday, Iranian Parliament Speaker and senior negotiator Mohammad Bagher Ghalibaf described the implementation of the US-Iran memorandum as "difficult, but possible." His remarks came during a meeting with Mohammad Darwish, head of Hamas' leadership council, who travelled to Iran to attend Khamenei's funeral ceremonies.

Meanwhile, Tehran witnessed one of the largest public gatherings in recent Iranian history as millions of mourners lined the streets for Khamenei's state funeral. The procession began from Tehran's Grand Mosalla Mosque, where the late leader had lain in state, before moving along a 10-kilometre route through the capital. Officials expect the ceremony to last up to 12 hours before the body is taken to the holy city of Qom for further religious rites and final burial.

The funeral drew top Iranian political, military and religious leaders, along with foreign delegations from across the region. Khamenei's sons also attended the funeral prayers, while mourners showered flowers on the coffin and carried red flags bearing slogans associated with calls for justice and resistance.

Iranian President Masoud Pezeshkian described the funeral as more than a farewell, saying it represented a renewed commitment to continue Khamenei's political and ideological legacy. State media claimed the event had attracted millions of participants, calling it one of the country's largest public gatherings.

The funeral also reflected the continuing tensions in the region. Israeli Defence Minister Israel Katz warned that Israel would act against any future Iranian leader who sought the country's destruction. Separately, reports emerged of fresh Israeli military activity in southern Lebanon, where state media said explosions occurred during overnight operations.

In another development, reports suggested Pakistan could host the next round of US-Iran negotiations on July 11, although there has been no official confirmation from either Washington or Tehran.

Energy markets also remained in focus after OPEC+ announced its fifth consecutive monthly increase in oil production. Beginning in August, seven member countries will collectively raise output by 188,000 barrels per day as global crude prices continue to ease following the recent conflict involving Iran, Israel and the United States.

Despite the diplomatic opening with Washington, Iranian leaders maintained a firm public stance. Earlier in the day, Ghalibaf described the MoU as a political achievement for Iran and the so-called "Axis of Resistance," while warning that Tehran would continue to resist external pressure.

The funeral ceremonies come at a critical moment for West Asia, where regional powers are balancing renewed diplomatic engagement with persistent security tensions. Analysts believe the implementation of the US-Iran understanding, combined with leadership changes in Tehran, could significantly influence the region's political and strategic landscape in the coming months.