US denies Iran report on draft peace deal to reopen Hormuz

The U.S. denied an Iranian state television report on a draft interim peace deal that said maritime traffic through the Strait of Hormuz could return to normal within a month of it coming into effect.

“This report from Iranian controlled media is not true and the MOU they ‘released’ is a complete fabrication,” the White House said in a social media post on Wednesday. “Nobody should believe what Iranian state media is putting out.”

Oil had dropped on the Iranian report, with Brent falling almost 4% to below $96 a barrel. It’s declined more than 7% this week as traders become increasingly more optimistic there will be an agreement.

Other key points reported by Iran’s IRIB News included the U.S. lifting its naval blockade on Iranian ports and the American navy leaving waters surrounding Iran.

The draft also said Iran and Oman will have a mechanism in place to oversee shipping in the strait. That’s one of the most contentious issues holding up a deal, with the U.S. saying vessels must be allowed free passage. Oman has not commented in recent weeks on Iran saying the two are in discussions about managing the strait.

“Managing the passage of ships, their inspection and receiving service fees are at the discretion of the Islamic Republic and in partnership and in cooperation with Oman,” the Iranian state TV report said. Iran hasn’t committed to unconditionally reopening the strait, it said.

Iran and the U.S. are negotiating to extend their ceasefire by around two months and reopen the vital Strait of Hormuz. Tehran’s effective closure of the waterway at the start of the war in February has sent oil and natural gas prices soaring and pushed up inflation globally.

Both Iran and the U.S. have said their talks, via mediators such as Pakistan and Qatar, are making progress. Marco Rubio, U.S. President Donald Trump’s secretary of state, said on Tuesday it would take a few more days to reach an agreement.

An Iranian delegation recently returned to Tehran following intense talks in the Qatari capital of Doha that yielded good progress, according to a diplomat with knowledge of the visit.

The negotiations, in coordination with the U.S., focused on the Strait of Hormuz and Iran’s highly enriched uranium, while the issue of Tehran’s frozen funds was also discussed as part of a potential final agreement, said the diplomat, who asked not to be identified when speaking of private discussions.

Tensions remain high and on Monday night the U.S. killed several Iranian soldiers in an attack on ships it said were laying mines near the strait. Iran fired back at American jets and said it downed an unmanned drone.

“Indirect contacts with the Americans are continuing,” Ali Bagheri-Kani, deputy secretary of Iran’s Supreme National Security Council, said on Wednesday in Russia, where he is attending a security forum. “Until we have agreed on all issues, we consider that we have agreed on nothing.”

“There is no doubt that the conditions for passage through the Strait of Hormuz and the procedure for doing so will not be the same as before,” said Bagheri-Kani. “A completely different procedure will be introduced. Iran and Oman, as neighboring coastal states, are holding talks to determine a new mechanism for passage through the Strait of Hormuz.”

The warring sides, who agreed to a fragile ceasefire in early April, also need to agree on what portion of Iranian financial assets will be unfrozen and how quickly. On Tuesday, Iranian state media said Tehran wants $12 billion unfrozen once the so-called memorandum of understanding — as the two sides are describing the interim deal — is agreed.

Iran hawks in the U.S., including Senator Lindsey Graham, are likely to balk at that and pressure Trump to revert to bombing the country.

Another potential obstacle is a parallel war in Lebanon between Israel and Tehran-backed Hezbollah militants.

Israel has stepped up attacks in recent days and said its ground forces are moving further into its northern neighbor’s territory.

Israeli forces will go beyond a strip of land roughly 10 kilometers (6.2 miles) into the south of Lebanon, the military said. Israel has increased strikes elsewhere in the country and killed the new head of the military wing of Hamas, another group allied with Tehran, in Gaza on Tuesday.

Iran insists the ceasefire has to cover “all fronts,” including Lebanon. Israel, which started the wider war when it bombed Iran alongside the U.S., is reluctant to accept any restrictions on its operations in its northern neighbor. It says its actions are necessary to protect its border communities and counter Hezbollah’s rockets and drones.

Hezbollah, classified as a terrorist organization by the U.S., has “crossed all red lines” with a surge of lethal drone attacks, Eli Cohen, a minister in Netanyahu’s security Cabinet, told Israel’s Army Radio.

Several explosive drones fell in Israeli territory near the border with Lebanon on Wednesday, the Israel Defense Forces said.

Here’s more on the Iran war:

•Commercial shipping through the Strait of Hormuz gained modest momentum over the past 24 hours as at least two non-Iranian supertankers exited the Persian Gulf, the latest mini-flurry in energy flows transiting the vital waterway.

•An oil tanker named Olympic Life reported an explosion off the coast of Oman on Tuesday, according to the Joint Maritime Information Center.

•French Finance Minister Roland Lescure reiterated the government’s goal to reduce the deficit to 5% of output this year and below 3% in 2029 even as the Iran conflict weighs on the economy.

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—With assistance from Josh Wingrove, Fiona MacDonald and Meghashyam Mali.