Iran Weighs US Peace Proposal as Trump Issues New Strike Threats and Mixed Signals

On May 7, 2026, Iran is expected to hand mediators its formal reply to the latest US proposal for ending the war that has convulsed the Middle East since late February [1]. The response comes after weeks of back-channel exchanges routed through Pakistan, a flurry of contradictory signals from President Donald Trump — who simultaneously claims "great progress" and threatens to resume bombing "at a much higher level" — and the largest US naval buildup in the region since the 2003 invasion of Iraq [2][3].

What's on the table is deceptively simple: a one-page memorandum of understanding that would declare the war over, reopen the Strait of Hormuz, and establish a 30-day window for detailed nuclear and sanctions negotiations [4]. What's behind it is anything but.

The Road to War — and Back to the Table

The current crisis did not begin in February 2026. Its roots trace to the five rounds of Omani-mediated nuclear talks held between April and May 2025, when US Special Envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi met in Muscat and Rome to discuss limits on Iran's nuclear program [5][6]. Those talks stalled over a fundamental gap: Washington demanded that Iran halt uranium enrichment entirely — a position Tehran called a "nonstarter" — while Iran insisted on retaining enrichment rights with negotiable limits on volume and purity [5].

The diplomatic window slammed shut on June 13, 2025, when Israel launched strikes on Iranian nuclear facilities at Natanz, Fordow, and Isfahan in what the Pentagon designated "Operation Midnight Hammer" [7]. Iran suspended cooperation with the International Atomic Energy Agency (IAEA) by early July, and all inspectors left the country by July 4 [8]. A sixth round of US-Iran talks, scheduled for June 15 in Oman, was indefinitely suspended [5].

The situation escalated dramatically on February 28, 2026, when the United States and Israel launched coordinated strikes on Iran, targeting military installations, government sites, and assassinating several senior Iranian officials, including Supreme Leader Ali Khamenei [9]. Iran responded by closing the Strait of Hormuz — the chokepoint for roughly 20% of the world's oil supply — triggering a global energy crisis [10].

A two-week ceasefire brokered in early April brought the first pause in fighting [11]. Since then, mediators — initially Oman, now Pakistan — have shuttled proposals between Washington and Tehran.

What's in the Deal — and What's Missing

The framework under negotiation has three phases. In the first, the Strait of Hormuz would gradually reopen and the US blockade on Iranian ports would lift, while Tehran would take responsibility for clearing sea mines [4][12]. In the second phase, Iran would accept a moratorium on uranium enrichment — the duration is the central sticking point, with at least three sources saying 12 years and one putting 15 as a likely landing zone — followed by a resumption of enrichment at 3.67%, the cap set by the 2015 JCPOA [4][12]. The third phase envisions a broader regional security dialogue with Iran's Arab neighbors [12].

In exchange, the US would commit to gradually lifting sanctions and releasing billions of dollars in frozen Iranian funds [4]. A non-aggression pledge, including from Israel, is also part of Iran's demands [12].

How This Compares to the JCPOA

The 2015 Joint Comprehensive Plan of Action limited Iran's enrichment to 3.67% using only first-generation centrifuges, capped its stockpile of low-enriched uranium at 300 kilograms, and imposed these restrictions for 10 to 15 years depending on the provision [13]. The current proposal appears to go further in some respects — demanding that Iran ship its entire stockpile of highly enriched uranium out of the country — while potentially offering a shorter moratorium period [1]. The JCPOA, however, did not require a total halt to enrichment, making the current US demand significantly more restrictive than the Obama-era agreement [13].

Iran submitted its own 14-point counter-proposal on May 2, delivered to Washington via Pakistani intermediaries [14]. The plan prioritized ending the war and reopening maritime routes before addressing nuclear issues — a sequencing the Trump administration initially rejected but appears to have partially accepted [15]. Trump called Iran's initial terms "unacceptable" on May 3, but by May 6, officials on both sides described movement toward a compromise [2][16].

The Nuclear Calculus

Iran's nuclear breakout time — the period needed to produce enough weapons-grade uranium for a single device — has fluctuated dramatically over the past decade.

Source: CRS / IAEA estimates

Data as of May 7, 2026CSV

Under the JCPOA, breakout time was estimated at roughly 12 months [8]. After the US withdrew from the agreement in 2018, Iran progressively expanded its program. By 2024, the Defense Intelligence Agency assessed that Iran would need "probably less than one week" to produce weapons-grade highly enriched uranium [8]. The June 2025 Israeli strikes on Natanz and Fordow significantly damaged Iran's enrichment infrastructure, and US intelligence estimates now place the breakout timeline back at approximately one year [8][7].

The IAEA's June 2025 Board of Governors resolution — the first formal finding of Iranian non-compliance since 2005 — underscored the severity of the situation: Iran had been enriching uranium to 60%, far beyond the JCPOA's 3.67% limit, and had accumulated roughly 128 kilograms of near-weapons-grade material [8].

But the strikes also created a verification vacuum. With IAEA inspectors out of Iran since July 2025, the international community has limited visibility into what Iran is doing with its remaining nuclear infrastructure [8]. Any deal will need to address how to restore monitoring — a challenge complicated by the collapse of trust on both sides.

Iran's Economic Catastrophe

The economic argument for a deal is stark. Sanctions, war, and the Hormuz blockade have devastated Iran's economy.

Source: World Bank Open Data

Data as of Dec 31, 2024CSV

Inflation exceeded 48.6% in October 2025 and accelerated to 62.2% year-on-year by February 2026, with food prices rising 99% [17]. GDP contracted 2.7% in the 2025/26 Iranian fiscal year [17]. The rial crossed the psychologically significant threshold of 1 million to the dollar in March 2025 and has since collapsed further — losing 60% of its remaining value in the months following the July 2025 strikes and falling to approximately 1.44 million per dollar by March 2026 [17][18].

Source: CNBC / Central Bank of Iran data

Data as of May 7, 2026CSV

Iran's GDP has fallen from roughly $600 billion in 2010 to an estimated $356 billion in 2025, a contraction driven primarily by sanctions that have severed the country from global financial markets and sharply reduced oil export revenues [17]. The specific sanctions relief Iran is demanding — release of frozen funds, removal of restrictions on oil sales and banking — represents an existential economic lifeline, not merely a diplomatic concession.

The war has also sent global oil prices surging. WTI crude, which traded near $58 per barrel in late 2025, spiked to $114.58 in April 2026 — an 87.6% year-over-year increase — as the Hormuz closure disrupted tanker traffic [19].

Source: FRED / EIA

Data as of May 4, 2026CSV

The Case Against Surrender: Why Iran's Hardliners Resist

Within Iran's political establishment, a vocal faction argues that conceding on nuclear capabilities under military threat would be suicidal — and they invoke specific historical precedents.

Libya's Muammar Gaddafi dismantled his nuclear program in 2003 under Western pressure, only to be overthrown in a NATO-backed uprising and killed by armed rebels in 2011 [20]. Ukraine gave up the nuclear arsenal it inherited from the Soviet Union under the 1994 Budapest Memorandum, receiving security assurances from Russia, the US, and the UK — assurances that proved hollow when Russia annexed Crimea in 2014 and launched a full-scale invasion in 2022 [20].

Ultra-hardliner outlets have explicitly framed the current negotiations as "Libyazation of Iran," warning Supreme Leader Mojtaba Khamenei that compliance with American demands is a path to regime collapse, not stability [20][21]. This faction points to Israel's influence over the Trump administration and argues that any deal leaving Iran without a credible deterrent will simply postpone, not prevent, a future military campaign aimed at regime change [20].

The counter-argument — advanced by Iranian reformists and pragmatists — holds that the war has already demonstrated the limits of deterrence. Iran's proxy network proved less capable than expected, the economy is in freefall, and continued resistance risks further destruction without meaningful strategic gain [22]. But hardliners maintain that capitulating now, from a position of weakness, would be more destabilizing than absorbing further strikes.

The Regional Power Map

The war has clarified — and complicated — the positions of every major regional and global actor.

Israel participated directly in the February 2026 strikes and has agreed to the April ceasefire, but senior Israeli officials have signaled openness to negotiations only under certain conditions. Israel's core demand remains the permanent dismantlement of Iran's nuclear infrastructure — a maximalist position that exceeds even the current US proposal [11][23].

Saudi Arabia has called for negotiations that "address all issues" contributing to regional instability, a formulation that encompasses Iran's ballistic missile program and support for proxy groups as well as the nuclear file [11]. Oman, the only Arab Gulf state to openly criticize the US-Israeli strikes, has sought to maintain a mediating role [11].

The European E3 — the UK, France, and Germany — triggered the JCPOA's "snapback" mechanism in August 2025, reimposing previously terminated UN sanctions on Iran [24]. They have also signaled willingness to back "proportionate military defensive measures" against Iranian drones and missiles, though the UK has limited its role to defensive intercept operations [23].

Russia condemned the strikes from day one, warning of "humanitarian, economic, and even radiological disaster," and coordinated with China to convene emergency UN Security Council sessions [25]. China declared itself neutral while opposing the use of force, though intelligence assessments suggest Beijing prepared to offer financial aid and missile components to Tehran [25][26]. Both powers have provided limited material support — Russia shared intelligence on US military positions — while calculating that an American quagmire in the Middle East serves their broader strategic interests [25][26].

The Military Reality

The US has assembled the largest Middle Eastern naval presence in over two decades. Three carrier strike groups — the USS Abraham Lincoln, USS Gerald R. Ford, and Carrier Strike Group 10 — are operating simultaneously in the region, a wartime-level configuration not seen since the early 2000s [27][28]. Under normal circumstances, the US maintains a single carrier in the area.

Iran's proxy network entered the war but with limited effect. Hezbollah launched missile attacks on Israel from Lebanon on March 2, 2026, prompting Israeli air and ground responses [9]. Iraq's Islamic Resistance coalition claimed 67 drone and missile attacks in the war's first three days, targeting US and Iraqi military sites [9]. The Houthis struck Israeli territory in late March with ballistic missiles and drones, though most were intercepted [29].

But independent analysts note a gap between these groups' rhetoric and capabilities. The proxies are "severely constrained by domestic politics and a lack of capabilities compared to US and Israeli arsenals," with their response described as "mostly rhetorical, paired with a limited number of face-saving strikes" [29][22]. The fear that a US strike would trigger a region-wide conflagration involving all of Iran's allies has so far materialized only in attenuated form.

The Durability Problem

Even if a deal is reached, the central question is whether it can last — given that the JCPOA, achieved after years of painstaking multilateral negotiation, collapsed within three years of its signing when the Trump administration withdrew in 2018.

The E3's August 2025 invocation of the snapback mechanism reimposed and indefinitely extended UN sanctions on Iran [24]. Russia, China, and Iran have challenged the snapback's legitimacy, arguing that the E3 had "ceased to perform" their own JCPOA commitments and thus lacked standing to invoke the mechanism [24]. This legal dispute underscores how fragile international consensus on Iran enforcement has become.

Critics of any new agreement argue that without Senate ratification — the JCPOA was implemented as an executive agreement, not a treaty — a future US president could again withdraw unilaterally [13]. Iran, burned by the 2018 experience, has little reason to trust that American commitments will outlast the administration that makes them. Proposed structural improvements include formal Senate ratification (politically unlikely given current congressional dynamics), automatic snapback triggers with clearly defined thresholds, and restored on-site IAEA inspection rights with short-notice access provisions [13][24].

Hawks in the US Congress argue that even these measures are insufficient. Their position: Iran's track record of deception, the IAEA's years-long inability to fully account for Iran's past nuclear activities, and the inherent difficulty of monitoring a program that has been partially driven underground by military strikes all make any verification regime unreliable [24].

What Happens Thursday

Iran's expected response will land in a volatile environment. Trump has simultaneously praised the trajectory of negotiations and warned that "the bombing starts" if Tehran does not agree to his terms [2]. Iran's Foreign Ministry has insisted that talks proceed on the basis of "engagement, not deception, extortion or coercion" [1].

The one-page MOU, if agreed, would mark only the beginning of a much longer process. Thirty days of detailed negotiations on enrichment limits, sanctions relief, inspection protocols, and regional security architecture would follow — any one of which could collapse the framework. The moratorium duration, the fate of Iran's enriched uranium stockpile, the scope of sanctions relief, and the inclusion of Israel in non-aggression commitments all remain unresolved.

What is clear is the cost of failure. The war has killed thousands, displaced populations across the region, sent oil prices to levels not seen since 2022, and pushed Iran's economy to the brink of collapse. Both sides have reasons to deal — and reasons to doubt that any deal will hold.