By Ariba Shahid, Steve Holland and Alexander Cornwell
ISLAMABAD/WASHINGTON/TEL AVIV, May 7 (Reuters) - U.S. President Donald Trump predicted a swift end to the war with Iran as Tehran considered a U.S. peace proposal that sources said would formally end the conflict while leaving unresolved key U.S. demands that Iran suspend its nuclear programme and reopen the Strait of Hormuz.
An Iranian foreign ministry spokesperson cited by Iran's ISNA news agency said Tehran would convey its response, while Iranian lawmaker
Ebrahim Rezaei, a spokesperson for parliament's powerful foreign policy and national security committee, described the proposal as "more of an American wish-list than a reality."
"They want to make a deal. 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 in the Oval Office on Wednesday, saying later "it'll be over quickly."
Trump has repeatedly played up the prospect of an agreement to end the war that started on February 28, so far without success. The two sides remain at odds over a variety of difficult issues, such as Iran's nuclear ambitions and its control of the Strait of Hormuz, which before the war handled one-fifth of the world's oil and gas supply.
A Pakistani source and another source briefed on the mediation said an agreement was close on a one-page memorandum that would formally end the conflict. That would kick off discussions to unblock shipping through the strait, lift U.S. sanctions on Iran and set curbs on Iran's nuclear programme, the sources said.
Iran's parliament speaker Mohammad Baqer Qalibaf appeared to mock reports that indicated the two sides were close, writing on social media in English that "Operation Trust Me Bro failed."
Qalibaf said such reports amounted to U.S. spin following its failure to open the Strait of Hormuz.
DEAL HOPES DRIVE OIL DOWN, SHARES RISE
Reports of a possible agreement caused global oil prices to tumble to two-week lows on Wednesday, with benchmark Brent crude futures falling about 11% to around $98 a barrel at one point before rising back above the $100 mark.
Global share prices also leapt and bond yields fell on optimism about an end to a war that has disrupted energy supplies. [O/R] [MKTS/GLOB]
“The contents of the U.S.-Iran peace proposals are thin, but there is an expectation in the market that further military action will not take place,” said Takamasa Ikeda, a senior portfolio manager at GCI Asset Management.
Trump on Tuesday paused a two-day-old naval mission to reopen the blockaded strait, citing progress in peace talks.
NBC News, citing two unnamed U.S. officials, said Trump's abrupt reversal came after Saudi Arabia suspended the U.S. military's ability to use a Saudi base for the operation.
Saudi officials were surprised and angered by Trump's announcement that the U.S. would help escort ships through the Strait of Hormuz, leading them to tell Washington they would deny the U.S. permission to fly military aircraft out of a Saudi base or through Saudi airspace, NBC reported.
The White House did not immediately respond to a request for comment on the report.
The U.S. military has kept up its own blockade on Iranian ships in the region. U.S. Central Command said forces fired at an unladen Iranian-flagged tanker on Wednesday, disabling the vessel as it attempted to sail toward an Iranian port in violation of the blockade.
NO MENTION OF KEY U.S. DEMANDS
The source briefed on the mediation said the U.S. negotiations were being led by Trump's envoy Steve Witkoff and son-in-law Jared Kushner. If both sides agreed on the preliminary deal, that would start the clock on 30 days of detailed negotiations to reach a full agreement.
While the sources said the memorandum would not initially require concessions from either side, they did not mention several key demands Washington has made in the past, which Iran has rejected, such as the restrictions on Iran's missile programme and an end to its support for proxy militias in the Middle East.
The sources also made no mention of Iran's existing stockpile of more than 400 kg (882 pounds) of near-weapons-grade uranium.
(Reporting by Reuters bureaus; Writing by Lincoln Feast; Editing by Kate Mayberry)
