Pakistan sees US-Iran deal close as Hormuz standoff drags on, Trump toughens stance

Pakistan's defence minister has said the US and Iran are "close to some sort of arrangement" over the Strait of Hormuz, even as both sides appeared to harden their positions in the long-deadlocked negotiation, according to a Bloomberg report.

"Things are shaping up in favour of peace," Khawaja Asif told reporters in Islamabad on Tuesday, without giving details of any breakthrough. Talks between Iran and Oman about reopening Hormuz to some maritime shipping have reached an advanced stage, Al Jazeera reported earlier, citing a Qatari foreign ministry spokesperson.


Also read: Pakistan 'doing its utmost' to bring US and Iran back to negotiating table: Foreign Office

Oil prices erased gains following Asif's comments, the latest in a long run of conflicting statements about the status of talks over the critical waterway. Pakistan has been mediating during the conflict, alongside Qatar.

What triggered Trump's tougher tone?

The upbeat assessments came after US President Donald Trump toughened his stance, saying on Monday that Tehran should pay reparations for those killed in attacks linked to the Islamic Republic as well as in domestic protests. His comments came in response to a series of demands laid out by Iran over the weekend, including compensation for US violations of a now-lapsed interim peace deal agreed by the sides in June.

Iran will almost certainly reject Trump's latest demands, which the US president said will be included "firmly into any, and all, future negotiations," Bloomberg said. The back and forth appeared to reduce the chance that the warring parties will agree to any immediate pact on the waterway, where around a fifth of the world's oil and liquefied natural gas flowed before the conflict began on February 28.

Brent crude traded slightly lower in early afternoon trade in London, at about $87.50 a barrel. European diesel futures surged more than 10% as refineries in Libya and Russia came under attack, further tightening the market for the fuel considered the workhorse of the global economy.

Saudi Arabia extinguished a fire at its Jazan oil refinery early Sunday, the country's energy ministry said, with Yemen's Houthi militants claiming an attack on the facility hours later.

"The region cannot remain indefinitely in a state of neither war nor peace," Anwar Gargash, senior diplomatic adviser to the president of the UAE, wrote in a post on X, as cited by Bloomberg. "Its stability and the future of its peoples require clarity in vision and direction."

What is happening in the Gulf?

In a sign of ongoing tensions, the UK navy said it received a report on Tuesday of an incident involving a container ship and military forces in the Gulf of Oman, without providing further details. It was also informed of an incident off Yemen's Red Sea coast in which a cargo vessel reported being hit by an unknown projectile, resulting in casualties.

Vanguard Tech said separately that a Panama-flagged container ship was hit by a missile, and that the strike had left the vessel without command, according to Bloomberg. It was not clear who was behind the strike, but it occurred near the line of the US blockade.

Trump signalled over the weekend that he was prepared to let economic pressure on Iran build rather than launch fresh military strikes to force a reopening of Hormuz, Bloomberg said. Iran's economy has taken a hammering from the war, with much of its industrial capacity destroyed and crude exports severely curtailed by a US blockade. Central bank data shows year-on-year inflation recently reached 77%.

The currency, meanwhile, has fallen more than 10% from its prewar level, adding to the economic pressure on Iranians, according to Bloomberg. A depreciation of the rial sparked violent nationwide protests that peaked early this year, leading to a crackdown by authorities that left thousands dead. There have been no signs of the anti-government demonstrations resuming.

What is Iran demanding for a full reopening?

Tehran's demands for a full reopening of Hormuz include the US lifting its naval blockade on Iranian ports, the release of frozen assets and compensation for war damages, Bloomberg reported. It has also called for a permanent end to attacks on militant groups it backs in Lebanon, Iraq, Yemen and Gaza. Trump said on Monday that Iran should be held responsible for damages stemming from conflicts in these countries.

Also read: 'Compulsive addiction to sanctions': Iran accuses US of being 'incapable' of pursuing diplomacy

The effective closure of Hormuz is taking a toll on the global economy and trade. The cost of hiring a supertanker to carry oil on the benchmark Middle East-to-China route approached $500,000 a day, more than twice the cost before the war.

The Strait of Hormuz has been effectively closed since fighting began on February 28, when the US and Israel conducted an aerial campaign against Iranian targets after Iran closed the waterway in response to strikes by the two countries. The Islamic Revolutionary Guard Corps had warned that no ship would be allowed to pass through the strait, prompting several shipping firms to suspend operations in the region.

Iran's foreign minister Abbas Araghchi said last week that Tehran and Oman are "very close" to a deal on managing the waterway, though he cautioned that reopening it would still be "subject to other conditions," including compensation from the US. Oman's foreign ministry has described the talks as positive and constructive.

Araghchi has also alleged that the US has continued to violate the June memorandum of understanding, and said negotiations cannot resume until Washington ends these violations and compensates for them. Trump, for his part, said last week that the US is "only semi-negotiating" with Iran.