The U.S. and Iran are close to agreeing on a one-page memorandum to end the Gulf war, according to a Pakistani mediation source and another source briefed on the talks.
In an early morning social media post, U.S. President Donald Trump gave no details of any specific proposal but said the war could end if "Iran agrees to give what has been agreed to."
The sources confirmed information initially reported by the U.S. media outlet Axios. The proposed 14-point, one-page memorandum would formally end the war, followed by discussions to unblock shipping through the Strait of Hormuz, lift U.S. sanctions on Iran and agree curbs on Iran's nuclear program.
"We will close this very soon. We are getting close," said the source from Pakistan, which hosted the war's only peace talks so far and has continued in that role of mediator, ferrying proposals between the sides.
Reports of the possible agreement caused global oil prices to plunge, with benchmark Brent crude futures falling around 11% to around $98 a barrel.
Global share prices also leapt and bond yields fell on optimism of an end to a war that has disrupted energy supplies.
In his morning post, Trump said: "Assuming Iran agrees to give what has been agreed to, which is, perhaps, a big assumption, the already legendary Epic Fury will be at an end, and the highly effective Blockade will allow the Hormuz Strait to be OPEN TO ALL, including Iran."
"If they don’t agree, the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before," Trump added.
Hours earlier, Trump paused a three-day-old naval mission to reopen the blockaded strait, citing progress in peace talks.
Iran's Revolutionary Guards responded by saying that if U.S. "threats" had ended, passage through the strait would be possible under new terms it was putting in place, without giving details.
The White House, the State Department and Iranian officials contacted by Reuters did not immediately respond to requests for comment.
U.S. news channel CNBC quoted a spokesperson from the Iranian foreign ministry as saying Tehran was evaluating a 14-point U.S. proposal.
The source briefed on the mediation said the U.S. negotiations were being led by Trump's envoy Steve Witkoff and son-in-law Jared Kushner.
If both sides agreed on the preliminary deal, that would start the clock on 30 days of detailed negotiations to reach a full agreement, the source said.
The source said the full agreement would include the U.S. lifting sanctions and releasing frozen Iranian funds, Iran and the United States lifting competing blockades on the Strait of Hormuz and curbs on Iran's nuclear programme, to seek a pause or moratorium on Iranian enrichment of uranium.
While the sources said the memorandum would not initially require concessions from either side, the sources and Axios did not mention several of the key demands that Washington has made in the past and that have previously been rejected by Iran.
U.S. demands that were not mentioned include: curbs on Iran's missile program and an end to its support for proxy militias in the Middle East.
While the sources spoke of a moratorium on future Iranian enrichment of uranium, they did not mention Iran's existing stockpile of more than 400 kilograms (900 pounds) of uranium enriched to near weapons grade.
Washington has previously demanded Iran give this up before any end to the war. Iran has in the past insisted on its right to enrich uranium for peaceful purposes and denied ever seeking to build an atomic bomb.
Earlier, Trump announced a pause to "Project Freedom," a mission he had announced two days earlier to guide ships through the blocked strait.
The mission had failed to bring about any significant resumption of traffic through the waterway, while provoking a new wave of Iranian strikes on ships in the strait and on targets in neighboring countries.
In the latest incident, a French shipping company reported Wednesday that one of its container ships had been struck in the strait the previous day and that the injured crew had been evacuated.
In announcing he was pausing the mission, Trump cited "great progress" in negotiations with Iran, without giving further details.
Trump had said last week he was likely to reject Iran's latest proposal for talks. The Iranian offer also contained 14 points and also called for setting aside discussion of nuclear issues until after the war ended and the shipping dispute was resolved.
In comments on a visit to China on Wednesday, Iran's Foreign Minister Abbas Araghchi made no mention of Trump's latest remarks, but said Tehran was holding out for "a fair and comprehensive agreement."
Iran has effectively shut the Strait to all shipping apart from its own since the United States and Israel launched the war on Feb. 28. In April, Washington imposed its own separate blockade of Iranian ports.
Trump's Project Freedom mission to use the U.S. Navy to open the strait failed to persuade merchant ships that it was safe, while provoking new attacks from Iran, which said it was expanding the area under its control to include swathes of the coastline of the United Arab Emirates, on the strait's far side.
While the mission was in effect, Iranian drones and missiles hit several ships in and around the strait and targets in the UAE, including the only major Emirati oil port on the coast beyond the strait which allowed exports without crossing through it.
