Optimism that the Iran war may be near an end is growing, with a source saying a Pakistani mediator had made a breakthrough on "sticky issues", although Iran said the fate of its nuclear program had not been resolved.
The United States and Pakistan have been talking up prospects for a deal after nearly seven weeks of war, with US President Donald Trump saying the accord would open the Strait of Hormuz, through which a fifth of the world's oil and gas supply flows.
Closure of the strait has caused the worst oil price shock in history and forced the International Monetary Fund to downgrade its outlook for the global economy, warning prolonged conflict could push the world to the brink of recession.
Pakistan's army chief and Field Marshal Asim Munir, an important figure in mediation efforts, has arrived in Tehranto try to prevent a renewal of the conflict after talks in Islamabad that ended without a deal.
A senior Iranian official told Reuters the trip had led to greater hopes for a second round of talks and an extension of a two-week ceasefire, but said fundamental differences remain over its nuclear program.
US President Donald Trump said today that Israel and Lebanon have agreed to a 10-day ceasefire, which Iran had previously said was a precondition for peace talks.
US Defense Secretary Pete Hegseth said troops were poised to restart combat operations if a deal was not reached.
"We are reloading with more power than ever before, and better intelligence," Mr Hegseth told a Pentagon briefing. "We are locked and loaded on your critical dual-use infrastructure, on your remaining power generation, and on your energy industry. We'd rather not have to do it."
A security source told Reuters a deal was closing in and that the US wants a breakthrough before the ceasefire expires next week. Washington is offering to lift sanctions and unfreeze billions of dollars worth of Iranian assets, he said.
Iran will open the strait only if a permanent ceasefire is reached and there are United Nations guarantees that the US and Israel will not attack again in future, he said.
"We hope that the field marshal will have a draft in his hand when he flies out of Tehran," the source said.
A separate government source said the talks would be held "soon" in Islamabad although no date has been set.
Stock markets have rallied strongly in recent days on expectations of a swift resolution to the fighting, with global equities vaulting past their previous all-time highs in trading today. However, oil prices gained, showing continued uncertainty about the ceasefire prospects and the opening of the strait.
Nuclear issues remain unresolved
The war began with US-Israeli attacks on Iran on 28 February, triggering Iranian attacks on Iran's Gulf neighbours and reigniting the Israel-Hezbollah conflict. Thousands of people have been killed, mostly in Iran and Lebanon. Soaring energy costs have rattled investors and policymakers globally.
Iran's nuclear ambitions were a sticking point at last weekend's talks. The US proposed a 20-year suspension of all nuclear activity by Iran - an apparent concession from longstanding demands for a permanent ban. Tehran suggested a halt of three to five years, according to people familiar with the proposals.
Washington has pressed for any highly enriched uranium (HEU) to be removed from Iran. Tehran has demanded that international sanctions against it be lifted.
Two Iranian sources said there were signs of a compromise emerging on the HEU stockpile, with Tehran considering shipping part, but not all, of it out of the country, something it had previously ruled out.
Economic pressure on Iran
The war has led Iran to effectively shut the Strait of Hormuz to ships other than its own, sharply reducing exports from the Gulf. The US has sought to increase pressure on Iran's oil-dependent economy by imposing its own blockade on ships travelling to Iranian ports.
The US has now widened its blockade on Iranian shipping to include what it called contraband, including weapons, weapons systems, ammunition, nuclear materials, crude and refined oil products as well as iron, steel and aluminium.
Any vessel suspected of trying to reach Iranian territory will be subject to "visit, board, search and seizure", the US Navy said in an advisory.
Chairman of the Joint Chiefs of Staff Dan Caine said as of Thursday morning the US military had not boarded any ships and that 13 had turned around.
Tehran could consider allowing ships to sail freely through the Omani side of the strait without risk of attack as part of proposals it has offered in negotiations with the US, providing a deal is clinched to prevent renewed conflict, a source briefed by Tehran said.
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