Donald Trump has declared that he will run the Strait of Hormuz jointly with Iran after announcing a five-day ceasefire on striking its energy sites.
Claiming progress on a peace deal on Monday evening, Mr Trump said America would “jointly control” the key oil route and promised there would be a “very serious form of regime change” in the Islamic Republic.
The US president said he was talking with a “respected” Iranian leader who could be “exactly what we’re looking for” and claimed the Islamic Republic was eager for a deal to end the war.
Mr Trump said peace was likely but insisted that if negotiations fell apart, the US would “just keep bombing our little hearts out”.
Earlier in the day, Mr Trump made an about-turn on a 48-hour deadline he had imposed on Iran to reopen the Strait of Hormuz, the vital sea passage for oil shipments that has been blocked since the start of the war.
After the president threatened to “obliterate” Iran’s power plants, Tehran published a list of retaliatory targets in neighbouring Gulf states, including a nuclear power station in the UAE.
In a move which reassured markets instantly, Mr Trump said he would call off strikes for five days while peace talks took place, prompting the FTSE 100 to swing into the green and Brent crude to fall by 14 per cent to $96 (£76) a barrel.
On Wall Street, the Dow Jones rose by 1.7 per cent while the S&P 500 gained 1.4 per cent.
Asked by reporters who would control the Strait of Hormuz, Mr Trump said: “Jointly controlled. Maybe me, maybe me. Me and the ayatollah, whoever the ayatollah is.”
The news of the five-day ceasefire was welcomed by Sir Keir Starmer, who said: “The immediate priority has to be a swift resolution of the conflict and delivering a negotiated settlement that puts tough conditions on Iran, particularly in relation to nuclear weapons.”
The Prime Minister told MPs again that the conflict was “not our war” and there had to be a “lawful basis” for any UK involvement. He warned against any “false comfort” of thinking that there would be a “quick and early end” to the conflict.
Mohammad Bagher Ghalibaf, the speaker of the Iranian parliament, denied negotiations were taking place and accused Mr Trump of peddling “fake news … used to manipulate the financial and oil markets”.
Tehran later warned of further attacks on Israel and its allies.
Mr Trump told reporters that if a ceasefire were agreed, the Strait of Hormuz would reopen immediately.
He also said it would be “very easy” to take Iran’s uranium once an agreement had been made.
“If we have a deal with them, we’re going down and we’ll take it ourselves,” he said.
Mr Trump went on to say there would be a “very serious form of regime change” in Iran, before claiming this had taken place already because “everybody’s been killed from the regime”.
He used the example of Venezuela, where Nicolás Maduro was captured by US forces and replaced with Delcy Rodríguez, who has since worked closely with America.
“We are doing so well in Venezuela with oil and with the relationship between the president-elect and us, and maybe we find somebody like that in Iran,” he said.
On Monday night, Benjamin Netanyahu, the Israeli prime minister, vowed to continue bombing Iran.
“We are continuing to strike in both Iran and Lebanon,” he said.
“We are smashing the missile programme and the nuclear programme and we continue to deal severe blows to Hezbollah. Just a few days ago, we eliminated two more nuclear scientists – and we are still active.”
It was unclear whether Mr Trump was suggesting he would have a direct hand in Tehran’s governance, or who the new Iranian leader could be, as well as what role, if any, the Gulf states would play in the country after the war.
Iran’s supreme leader is currently Mojtaba Khamenei, who is regarded as a hardline conservative figure.
Mr Trump said the US was not talking to Mr Khamenei, whom he said could be dead, but that a member of the negotiating team could be “exactly what we’re looking for”.
From the American side, the peace talks are being led by Steve Witkoff, the Middle East envoy, and Jared Kushner, the president’s son-in-law.
The two men negotiated with Iran on curbing its nuclear and ballistic missile programmes in February. When those talks stalled, Mr Trump began bombing Tehran on Feb 28. The war is now in its fourth week.
The US president did not name the negotiators on the Iranian side, but it is believed he was referring to Mr Ghalibaf, whose subsequent denial could be put down to internal power dynamics.
He claimed Mr Trump blinked first in response to chaos in the financial and bond markets, in addition to Tehran’s “military threats”. One headline on Iranian state TV said: “Trump retreated after Iran’s decisive warning.”
The Trump administration has repeatedly said the war will not end until its strategic objectives are met. They include the dismantling of Iran’s nuclear and ballistic missiles programmes and the destruction of its proxies in the Middle East.
Mr Trump claimed initial talks had yielded “major points of agreement” and that Iran’s leadership had conceded it would never obtain a nuclear weapon.
‘They called me, I didn’t call them’
Last Friday, Mr Trump, under pressure at home after oil prices had spiked to as high as $119 per barrel, claimed he did not want a ceasefire because “you don’t do a ceasefire when you’re literally obliterating the other side”.
He said Iran’s leadership had made contact to initiate the peace talks after his threats to target their energy sites.
“Tomorrow morning, sometime their time, we were expected to blow up their largest electric generating plants that cost over $10 billion to build… and one shot it’s gone. It collapses. Why would they want that?” he said.
“So they called, I didn’t call, they called, they want to make a deal.”
Initial peace talks had taken place by phone, but the negotiators would “very soon meet”, he said.
“If it goes well, we’re going to end up with settling this. Otherwise, we’ll just keep bombing our little hearts out,” he said.
On Monday, Israel said its air force had begun another wave of strikes “targeting infrastructure of the Iranian terror regime across Tehran”.
Elsewhere, a Royal Navy warship deployed to the Mediterranean was due to begin operations to protect Cyprus from Iranian attack on Monday night, Britain’s Defence Secretary said.
John Healey said HMS Dragon, a £1bn guided-missile destroyer, had arrived in the region after deploying from Portsmouth more than two weeks ago.
The ship was scrambled into action after an attack drone struck RAF Akrotiri, an air base in Cyprus, on March 1, hitting a hangar reportedly housing an American U-2 spy plane.
Giving a statement in Parliament on Monday, Mr Healey said: “HMS Dragon has arrived in the Eastern Mediterranean and tonight begins operations and integration into Cyprus’s defence alongside allies.”
The Defence Secretary added that lightweight multiple launchers, capable of firing supersonic missiles to destroy drones, would be deployed to Bahrain.
At the same time, Rapid Sentry – another ground-based air defence system used by the RAF – will be deployed to Kuwait.
In London, it was feared that Iran was behind an attack on a synagogue in Golders Green, where four ambulances owned and run by a Jewish charity were set on fire.
The Foreign Office summoned Iran’s ambassador to the UK, criticising Tehran’s “reckless and destabilising actions” in Britain and overseas.