Absolutely they should give up their only bargaining chip. That will leave them in a stronger position, obviously, as they will be literally decimated -but- they can then complain about how ruthlessly they were destroyed. I'm sure the arbiter will just put everything back as it was before any of this mess even happened.

Especially since the arbiter is one Donald J. Trump, a Colossus of a man with an immaculate reputation for fairness, and a knack for both resurrecting eradicated families and magically repairing destroyed infrastructure with a flick of his wand. Yes, release the hostages unconditionally, I'm sure it'll just work out for you if you, I dunno, pray hard enough. (But not like that, though. We don't recognise that kind of prayer)