World capitals and markets were waiting on May 7 for Tehran to respond to Washington’s latest proposed deal to end the war in the Middle East and to reopen the key shipping lane out of the Gulf.
Asian stocks soared and oil prices fell after U.S. President Donald Trump said once again that an agreement could be near after positive talks, and Iran said it would pass on its latest position to mediator Pakistan.
Any agreement to prolong the ceasefire between the United States and Iran could also lower tensions in Lebanon, where an already fragile truce with Israel was under renewed strain after a strike on southern Beirut killed a Hezbollah commander.
The war, launched by the United States and Israel in late February, has seen Iran respond with attacks across the Middle East and impose a chokehold on the Strait of Hormuz, the gateway to the Gulf oil and gas industries and a strategic trade route.
Trump had this week briefly launched a naval operation to escort commercial vessels and force open the strait, only to stand it down within hours, citing progress on negotiations with Iran, which have been mediated by Pakistan and supported by Washington’s Gulf Arab allies.
“We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make a deal,” Trump told reporters on May 6, adding his now habitual threat to return to bombing if Tehran refuses to back down to U.S. demands.
Iran’s Foreign Ministry spokesman Esmaeil Baqaei said the U.S. proposal remained “under review” and Tehran would communicate its position to mediator Pakistan “after finalizing its views.”
According to a report from U.S. network NBC News, Trump’s U-turn came after Saudi Arabia, whose Crown Prince Mohammed bin Salman reportedly talked directly to Trump, refused to allow U.S. forces to use its airspace and bases for the operation to force passage through Hormuz.
U.S. news outlet Axios, citing two officials, reported that both Tehran and Washington were close to agreement on a one-page memorandum of understanding to end the war and set a framework for negotiations on Iran’s nuclear program.
Oil prices fell again, tumbling by two percent on May 7, having fallen around 10 percent over the previous two days, and Tokyo’s Nikkei index led another strong rally across Asia stocks, fueled by revived optimism that the talks will bear fruit.
Energy prices are still much higher than before the conflict, but international standard Brent and US benchmark West Texas Intermediate are both now below the symbolic $100 level.
Markets have been particularly concerned about the Strait of Hormuz, which in peacetime carries a fifth of the world’s oil and LNG trade as well as a good chunk of its fertilizer.
