Updates with changes throughout
A peace deal under discussion with Iran would reopen the strait of Hormuz to navigation and lift the US blockade on Iranian trade, President Donald Trump said on Wednesday.
"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," Trump said in a social media post, referring to the US designation for the military operation against Iran that started on 28 February. "If they don't agree, the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before."
Iran's foreign ministry said it was still reviewing a US proposal, state news agency Isna said on Wednesday. Iran's Tasnim agency, which is linked to Islamic Revolutionary Guard Corps (IRGC), said that the US proposal "contains some unacceptable clauses".
Crude futures dropped sharply after Trump on Tuesday paused the US military mission to force Hormuz open and said that the US and Iran were close to a diplomatic breakthrough.
Oil futures have gyrated over the past month after reported breakthroughs in the US-Iran talks that subsequently turned out to have been false starts.
The US and Iran reached agreement on a ceasefire on 7 April, but the transit of vessels through the strait of Hormuz is still at a fraction of pre-war levels. Tehran has maintained tight control over the critical Mideast Gulf waterway, while the US has enforced a blockade of Iranian trade since 13 April.
Neither Tehran nor Washington officially confirmed details of a possible agreement. Previous statements from Washington and Tehran have outlined the contours of an agreement that would curb Iran's nuclear program in exchange for sanctions relief for Tehran. But red lines drawn by both sides — the US insistence on eliminating Iran's theoretical capacity to produce nuclear weapons and Tehran's assertion of control over Hormuz — will have to be reconciled.
The sequence of addressing the points of contention is also an issue, with Tehran keen to push discussion of its nuclear program to a later date.
Senior US and Iranian leaders met face to face in Pakistan on 11-12 April, but that round of diplomacy ended without an agreement. The two countries since then have communicated indirectly, through Pakistan.
The US on 4 May launched a military mission, dubbed Project Freedom, to challenge Tehran's control over Hormuz.
Tehran responded to Project Freedom by launching missiles and drones at US warships and commercial ships transiting Hormuz, while the US destroyed six Iranian naval boats. Iran also targeted the port of Fujairah in the UAE. Trump said on Tuesday he would pause Project Freedom.
Tehran had been reviewing the latest US peace proposal before Trump ordered the latest US military mission, and the subsequent confrontation put that review on pause, Tasnim claimed. "After Trump's retreat, Iran has resumed its review in this regard and will announce to the mediator whenever it reaches a conclusion," Tasnim said.
