WASHINGTON (Reuters) - President Donald Trump on Sunday rejected Iran's response to a US proposal for peace talks, dashing hopes for an imminent end to the 10-week-old conflict that has caused widespread damage in Iran and Lebanon, paralysed maritime traffic in the Strait of Hormuz and driven up global energy prices.
Days after the US floated an offer in the hopes of re-opening negotiations, Iran on Sunday released a response focused on ending the war on all fronts, especially Lebanon, and on the safety of shipping through the blockaded Strait of Hormuz, Iranian state TV said.
Within hours of the Iranian proposal's release, Trump dismissed it with a post on social media.
"I have just read the response from Iran’s so-called 'Representatives'. I don’t like it - totally unacceptable," Trump posted on Truth Social, without giving further details.
Oil prices rose US$3 a barrel after the United States and Iran failed to reach an agreement.
Iran's proposal includes a demand for compensation for war damages and an emphasis on Iranian sovereignty over the strait, state media said.
It also calls on the US to end its naval blockade, guarantee no further attacks, lift sanctions and end a US ban on Iranian oil sales, the semi-official Tasnim news agency said.
The US had proposed an end to fighting before starting talks on more contentious issues, including Iran's nuclear program.
The Wall Street Journal quoted unnamed sources saying Iran proposed diluting some of its highly enriched uranium and transferring the remainder to a third country.
Pakistan, which has been mediating talks over the war, forwarded the Iranian response to the US, a Pakistani official said.
Despite a month-old ceasefire in the conflict and after some 48 hours of relative calm, hostile drones were detected over several Gulf countries on Sunday, underlining the threat still facing the region.
But the QatarEnergy-operated carrier Al Kharaitiyat passed safely through the strait and was heading for Pakistan's Port Qasim, according to data from shipping analytics firm Kpler. It was the first Qatari vessel carrying liquefied natural gas to cross the strait since the US and Israel started the war on Feb 28.
Sources said earlier the transfer, which offered a modicum of relief to Pakistan after a wave of power blackouts caused by a halt to gas imports, had been approved by Iran to build confidence with Pakistan and with Qatar, another mediator.
In addition, a Panama-flagged bulk carrier bound for Brazil that had previously attempted to transit the strait on May 4 passed through, using a route designated by Iran’s armed forces, Tasnim reported on Sunday.
TRUMP UNDER PRESSURE TO END WAR AHEAD OF CHINA VISIT
With Trump due to visit China this week, there has been mounting pressure to draw a line under the war, which has ignited a global energy crisis and poses a growing threat to the world economy.
Tehran has largely blocked non-Iranian shipping through the narrow Strait of Hormuz, which before the war carried one-fifth of the world's oil supply and has emerged as one of the central pressure points in the war.
Addressing whether combat operations against Iran were over, Trump said in remarks aired on Sunday: "They are defeated, but that doesn't mean they're done."
Israeli Prime Minister Benjamin Netanyahu said the war was not over because there was "more work to be done" to remove enriched uranium from Iran, dismantle enrichment sites and address Iran's proxies and ballistic missile capabilities.
The best way to remove the enriched uranium would be through diplomacy, Netanyahu said in an interview with CBS News' 60 Minutes, without ruling out removing it by force.
Iran's President Masoud Pezeshkian said in a social media post that Iran would "never bow down to the enemy" and would "defend national interests with strength".
Despite diplomatic efforts to break a deadlock, the threat to shipping lanes and the economies of the region remained high.
On Sunday, the United Arab Emirates said it intercepted two drones coming from Iran, while Qatar condemned a drone attack that hit a cargo ship coming from Abu Dhabi in its waters. Kuwait said its air defences had dealt with hostile drones that entered its airspace.
Recent days have seen the biggest flare-ups in fighting in and around the strait since a ceasefire began: the UAE came under renewed attack on Friday and sporadic clashes were reported between Iranian forces and US vessels in the strait.
Clashes have also continued in southern Lebanon between Israel and Iran-backed militant group Hezbollah, despite a US-brokered ceasefire announced on Apr 16.
Hostilities between Israel and Hezbollah reignited on Mar 2 when the Lebanese group opened fire after Tehran came under US-Israeli attack. The latest talks between Israel and Lebanon are due to start in Washington on May 14.
INTERNATIONAL MISSION PREPARATIONS DRAW IRANIAN WARNING
Surveys show the war is unpopular with US voters facing sharply higher gasoline prices less than six months before congressional elections.
The US has also found little international support, with NATO allies refusing calls to send ships to open the Strait of Hormuz without a full peace deal and an internationally mandated mission.
Domestically, Trump has had to fend off attempts by congressional Democrats to force an end to the war through War Powers Act legislation.
"This is a situation that has been made much worse by the actions of Donald Trump, and now he's floundering around trying to figure out a way to get out of it," US Senator Jack Reed, the senior Democrat on the Senate Armed Services Committee, told Fox News' Sunday Morning Futures show.