Peace deal 'closer than ever before' but Iran insists signing 'will not be tomorrow' - as Israel strikes Lebanon

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On Saturday, the United States and Iran signalled that an agreement to end their war was 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.

The exact timing of the signing of the Islamabad memorandum will not be on Sunday, Iran's Foreign Ministry spokesperson Esmaeil Baghaei said, according to state media on Saturday.

Baghaei said the possibility of signing the Islamabad memorandum in the coming days could not be ruled out, but added that caution was needed regarding any comment on the signing date due to the hesitation of the other side.

At least one person was killed on Saturday following a strike on the town of Marrakeh, located in Lebanon's Tyre district, according to local media.

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Iranian Foreign Minister Abbas Araqchi said that while changes in the deal were still possible, the tentative agreement showed his country had emerged stronger from the conflict.

"Iran is the winner of the war with the US," he said on state television on Friday.

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 Reuters.

The source, who spoke on condition of anonymity, said the drones had posed a threat to commercial traffic. US Central Command later confirmed the action and said the waterway was open.

The proposed memorandum of understanding calls for reopening the strait and lifting the US naval blockade on Iranian ports, sources on all sides of the talks said.

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

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

Pakistan has been mediating talks. Accounts of the draft proposal from Western, Pakistani and Iranian sources pointed to terms that could favour Iran, drawing criticism from Trump, who dismissed the reports as inaccurate.

While there were minor differences, the proposals broadly offered Tehran much of what it has sought, with Trump appearing to secure little beyond the reopening of the strait, which Iran closed after the US and Israel strikes in February.

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

"Our sword will always hang over the Strait of Hormuz," he said.

A Western source said the deal could be signed as soon as Sunday, with Geneva seen as the likeliest venue. Araqchi said the deal would be signed remotely before it is announced.

Pakistani Foreign Minister Ishaq Dar and Swiss Foreign Minister Ignazio Cassis spoke on Saturday, welcomed the progress in talks and agreed to stay in close contact, Pakistan's foreign ministry said in a brief statement. It gave no further details.

Draft terms described by multiple sources indicate the US would 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. The US official said the agreement would ultimately lead to the dismantling of Iran’s nuclear program, with its stockpile of highly enriched uranium to be destroyed and removed.

But Araqchi said that Iran, which sources said has not accepted the dismantling of its nuclear program, wanted to retain the uranium in diluted form.

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. The US official disputed that account.

"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's Prime Minister Benjamin Netanyahu said his country would not be party to the agreement.

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

Araqchi said the agreement would end the war in Lebanon, implying an Israeli withdrawal from occupied areas.

Israel's defence minister said it would not withdraw. A senior Israeli official said Israel expects to retain its freedom to act against threats.

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 stock markets rose and oil prices fell on the news. Brent crude prices were down more than 3 per cent at 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 Trump.

Some Republicans worry that the war's unpopularity could cost them control of Congress in November's midterm elections. But many of Trump's fellow Republicans may have difficulty endorsing an agreement viewed as too favourable to Iran.