Both US and Iran signal they are nearing a peace deal as Tehran claims victory

Both the United States and Iran are signalling that an agreement to end their war is close, with a senior US administration official saying both sides had agreed on a text and that Washington expects to sign an initial deal in the coming days.

Iranian Foreign Minister Abbas Araqchi cautioned changes to the text were still possible, but said the tentative agreement made it clear that his country had emerged stronger from the conflict.

Hours after those remarks, US forces shot down multiple Iranian one-way attack drones heading toward the Strait of Hormuz, a source familiar with the matter told the Reuters news agency.

The source, who spoke on condition of anonymity, said the drones had posed a threat to commercial ‌traffic.

Iranian news agencies had reported that explosions were heard along the strait in Iran's Sirik port and Qeshm island, which residents and local officials attributed to shots fired by Iranian forces to warn vessels attempting to cross the waterway without permission from the Revolutionary Guards' navy.

The proposed memorandum of understanding calls for reopening the Strait of Hormuz and lifting the US blockade on Iranian ports, sources on all sides of the deal said.

Negotiations over Iran's nuclear program — US President Donald Trump's stated rationale for starting the war — would take place afterward.

A senior US official, speaking on condition of anonymity, told reporters that the deal met Mr Trump's core objectives and put negotiations "in a very, very good place".

However, leaked terms of the proposed memorandum outlined by Western, Pakistani and Iranian sources earlier on Friday appeared to favour Iran, drawing criticism from Trump, who dismissed the reports as inaccurate.

While there were minor differences in the accounts, all appeared to offer Tehran much of what it has demanded so far, with the US president appearing to win little of what he has sought beyond the reopening of the strait.

Mr Araqchi said Iran would, along with Oman, still retain control of traffic through the strait, which before the war handled one-fifth of the world's oil and gas supply.

What's in the deal?

Draft terms of the deal described by multiple sources indicate that the US will immediately begin releasing billions of dollars in frozen Iranian assets and waive sanctions on its oil exports, in return for Iran opening the strait.

Iran's nuclear program would be addressed during a 60-day period of talks, which the US official said would ultimately lead to the dismantling of Iran's nuclear program, with its stockpile of highly enriched uranium to be destroyed and removed — a key US demand.

The proposals also include discussion of possible war reparations for Tehran and dropping longstanding US demands for limits on Iran's missile program, the sources said.

Another senior US official, describing the agreement, said Iran's stockpile of highly enriched uranium "will be destroyed and removed" and Iran's nuclear program would be dismantled. The terms also include an inspection regime to ensure it is enforceable in the long term.

"None of their money released until they perform. Strait of Hormuz will be open. No Iran funding of terrorist groups," said the official, who spoke on condition of anonymity.

"This is what they have agreed to. This is a performance-based deal."

Israel not party to memorandum

Israel, which launched the war alongside the United States, was not part of the negotiations, and Prime Minister Benjamin Netanyahu said his country would not be party to the agreement.

Mr Netanyahu has clashed with Mr Trump in recent weeks over US demands that Israel curb its military actions in Lebanon to allow Washington to reach a deal with Tehran.

Mr Araqchi said the agreement would end the war in Lebanon, which he added would mean Israel's complete withdrawal from occupied areas.

Israel's defence minister Israel Katz, however, said his country would not withdraw from Lebanon, and a senior Israeli official said Israel expected to retain its freedom to act against threats in areas under its control.

Deal could be signed as soon as Sunday

A Western source said the deal could be formally signed as soon as Sunday by US Vice-President JD Vance and Iran's parliamentary speaker, Mohammad Baqer Qalibaf, with Geneva seen as the likeliest venue.

Mr Araqchi said the deal would have to be signed remotely before it is announced.

The progress towards an agreement has emerged at the end of a week that brought a sharp escalation in hostilities in the Gulf, including Israeli-Iranian exchanges of fire and US strikes on Iranian targets, followed by retaliation against US bases.

Global stocks rose and oil prices fell on the news. Brent crude prices were down more than 3 per cent to their lowest in nearly two months.

The conflict has become a political headache for the White House, amid rising fuel prices and slipping approval ratings for Mr Trump.

And, despite some Republicans worrying the war's unpopularity could cost them control of Congress in November's midterm elections, many of Mr Trump's fellow Republicans may have difficulty endorsing an agreement viewed as too favourable to Iran.

Tehran has always said its nuclear program is peaceful and accepted tight curbs on it in return for the lifting of sanctions under a 2015 agreement with the administration of then-US president Barack Obama.

Trump abandoned that deal during his first term in 2018, and Iran responded by ramping up its enrichment of uranium, producing more than 400 kilograms of material at close to the purity needed to make a bomb.

Reuters