The US believes it is making progress with Iran in peace talks, but disagreements between Washington and Israel threaten to derail the diplomacy.

US President Donald Trump reportedly held a tense call on Tuesday with Israeli Prime Minister Benjamin Netanyahu, who railed against a pact under consideration. Markets rebounded Wednesday after Trump said Washington is in the “final stages” with Tehran.

But he has warned of US strikes if talks fail, prompting Iran to threaten to spread the war beyond the Middle East if attacks resume. “The central question now is not whether escalation may return, but how the next phase of the conflict could unfold,” an Iran scholar wrote, “and whether another round of war would fundamentally alter the strategic deadlock.”