World capitals and financial markets were on alert Thursday as Tehran weighed Washington’s latest proposed deal to end the war in the Middle East and reopen the Strait of Hormuz.

Asian stocks surged and oil prices fell after President Donald Trump said an agreement was “very possible,” and Iran said it would relay its position to mediator Pakistan.

Is Iran trying to make a deal with the United States?

Iran is actively reviewing a US peace proposal, with its foreign ministry confirming it will communicate its position to mediator Pakistan “after finalizing its views.”

The US and Iran are working on a one-page memorandum of understanding to end the war and set a framework for nuclear negotiations, according to Axios, citing two officials.

What is the latest US proposal to Iran?

Trump said Wednesday that talks over the previous 24 hours had been productive. “We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make a deal,” he told reporters, while repeating his threat to resume bombing if Tehran refused US demands. Iran’s foreign ministry spokesman Esmaeil Baqaei confirmed the proposal remained “under review.”

The negotiations have been mediated by Pakistan and supported by Washington’s Gulf Arab allies. According to NBC News, Trump paused a brief naval operation to force open the Strait of Hormuz after Saudi Arabia, whose Crown Prince Mohammed bin Salman reportedly spoke directly to Trump, refused to allow US forces to use its airspace and bases.

Why did Trump stand down the naval operation in the Gulf?

Trump launched and then quickly abandoned a naval escort operation to reopen the Strait of Hormuz, citing progress in negotiations with Iran. The about-face came within hours, with the White House pointing to diplomatic momentum rather than military pressure as the path forward.

Any deal to extend the ceasefire could also ease tensions in Lebanon, where a fragile truce with Israel was under renewed strain. Israel struck Beirut’s southern suburbs Wednesday in the first such attack in nearly a month, killing a senior Hezbollah commander from its elite Radwan force.

At least 11 others were killed in strikes across southern and eastern Lebanon, the country’s health ministry said.

How have oil prices reacted to the Iran-US talks?

Oil prices fell around 2 percent Thursday, extending a roughly 10 percent decline over the previous two days, as markets grew more optimistic that talks would succeed.

Both Brent crude and the US benchmark West Texas Intermediate dropped below $100 a barrel, though prices remain well above pre-conflict levels. Tokyo’s Nikkei index led a broad rally across Asian markets on the same optimism.

The Strait of Hormuz, which carries a fifth of the world’s oil and liquefied natural gas trade in peacetime, has been at the center of market anxiety since Iran imposed its blockade.

Concerns deepened Monday when the South Korean cargo ship HMM Namu caught fire while attempting to transit the channel. Trump claimed Iran had fired on the vessel, while Tehran’s embassy in Seoul flatly denied the allegation.

What are ordinary Iranians saying about a potential deal?

Inside Tehran, reactions to the prospect of a deal were far from celebratory. “We’ve gone through so much hardship and suffering, and no achievements for the people?” said Azadeh, a 43-year-old translator, speaking to AFP journalists in the city. “I honestly just hope they finish this regime.”

The Israeli military said Thursday that a drone strike had wounded four of its soldiers, one severely, in southern Lebanon the previous day. The Lebanese front remains a parallel pressure point as diplomats race to consolidate any broader agreement between Washington and Tehran.