On Sunday, Iran responded to a U.S. proposal for an initial deal to end the war and open up a 30-day window for negotiations towards a comprehensive agreement. “For now, we have decided to focus on ending the war, because this issue is a matter of concern for the entire region, for our nation, and for the international community,” Iran’s Foreign Ministry spokesperson Esmaeil Baqaeui said on state-owned Press TV.

Iran’s proposal includes demands for a permanent end to the war on all fronts, compensation for war damages, an end to the U.S. naval blockade, lifting of sanctions on Iran, and the end to a U.S. ban on Iranian oil sales, according to semi-official Tasnim news agency. Iran also wants to maintain control over the Strait of Hormuz after the war ends, Tasnim reported.

“I have just read the response from Iran’s so-called ‘Representatives,’” Trump posted on Truth Social on Sunday. “I don’t like it — TOTALLY UNACCEPTABLE!” Earlier on Sunday, Trump accused Iran of “playing games with the United States, and the rest of the World, for 47 years (DELAY, DELAY, DELAY!)”

The Trump Administration has publicly signaled that the war is ending soon, but tensions over the Strait have mounted since the U.S. imposed a naval blockade on April 13. Iran called the blockade a violation of the U.S.-Iran cease-fire, which took effect on April 8. Hostilities flared up last week, with the U.S. and Iran trading attacks around the Strait of Hormuz. Suspected Iranian attacks on Gulf States threaten to reignite full-blown hostilities. On Sunday, the United Arab Emirates said it intercepted two drones coming from Iran, Qatar reported a drone attack that hit a cargo ship in its waters, and Kuwait said it repelled unspecified “hostile drones.”

When asked if combat operations against Iran had ended, Trump said on Sunday, “They are defeated, but that doesn’t mean they’re done.”

Israeli Prime Minister Benjamin Netanyahu said on Sunday that war is “not over” until all of Iran’s enriched uranium stockpile is removed and its nuclear facilities dismantled. Israel sees Iran’s nuclear capabilities as a national security threat. Last year, Israel bombed Iranian nuclear facilities, with the U.S. later joining in the attacks.

Analysts have described the current state of play as a deadlock in which the hot war between the U.S. and Iran has paused but underlying tensions remain and could bubble up into renewed hostility at any time.

“I think we are seeing a ‘post-Mission Accomplished’ phase of the war, where the U.S. denies the existence of the war while continuing low-level but sustained hostilities,” William Figueroa, an assistant professor of international relations at the University of Groningen, previously told TIME.

U.S. and Israel’s focus: Iran’s nuclear capabilities

Iran offered to dilute some of its highly enriched uranium and transfer the rest to a third country, the Wall Street Journal reported, although Tasnim disputed the report, citing an unnamed source.

Last week, the U.S. had reportedly offered Iran a framework deal that would end fighting and lead to a 30-day period of negotiations on a comprehensive agreement focused on Iran’s nuclear program. The Iranian response was conveyed via Pakistan, which has been mediating U.S.-Iran negotiations.

American Ambassador to the United Nations Mike Waltz told Fox News on Sunday, “Trump has been clear they will never have a nuclear weapon and they cannot hold the world’s economies hostage.” Waltz did not rule out the possibility of the U.S. resuming hostilities with Iran if diplomacy falls through.

Trump previously said that Iran’s nuclear capabilities were completely destroyed in the U.S.-Israeli bombings last June, and last month said he was not concerned about Iran’s uranium stockpile because it is “so far underground.” U.N. observers have said it is difficult to assess how much of Iran’s nuclear capacity and enriched uranium stockpile remains because inspectors have had limited access to key nuclear sites.

But Netanyahu reportedly spoke with Trump on Sunday evening and Trump agreed that it was necessary to remove Iran’s stockpile. “There is still nuclear material, enriched uranium, that has to be taken out of Iran,” Netanyahu told CBS on Sunday. “There’s still enrichment sites that have to be dismantled. There are still proxies that Iran supports. There are ballistic missiles that they still want to produce.”

For those reasons, Netanyahu said there is “more work to be done” before the war can end. He said diplomacy would be the first step, but he did not rule out removing the uranium by force. 

“You go in, and you take it out,” he told CBS.

Nuclear diplomacy, however, has been strained. Iran previously said that U.S.-Israeli attacks, which have twice disrupted nuclear negotiations between the U.S. and Iran, made it difficult to take the U.S. at its word. During Trump’s first term in 2018, he pulled the U.S. out of an Obama-era nuclear deal with Iran.

But Netanyahu’s hardlined stance towards Iran could make reaching a peace agreement more difficult, especially as Iran wants a guarantee that it will not be attacked again once a deal is signed.

And Trump faces the challenge of negotiating a deal with Iran that does not make the U.S. appear to be a loser in the war, analysts tell TIME, while Iran has signaled that it will not acquiesce to U.S. demands so easily.

Iran will “never bow down to the enemy,” Iranian President Masoud Pezeshkian posted on X, adding that “if talk of dialogue or negotiation arises, it does not mean surrender or retreat.”

“For Washington, the priority is stabilization. Calmer oil and gas markets would reduce economic pressure and ease the political burden on President Trump, especially given his promise to avoid another major war,” Arman Mahmoudian, a research fellow with University of South Florida’s Global and National Security Institute and a native of Iran, tells TIME.

“For Tehran, however, instability is leverage,” Mahmoudian says. “As long as energy prices remain high and the Strait remains disrupted, Iran retains one of its few major bargaining cards.”

Iran’s red line: Israel’s war in Lebanon

After Iran-backed paramilitary Hezbollah launched attacks on Israel on March 2 in retaliation for the U.S.-Israeli assassination of Iran’s Supreme Leader Ali Khamenei, Israel has carried out a massive bombing campaign on southern Lebanon, killing thousands of people, including many civilians. While Israel and the Lebanese government agreed to a cease-fire on April 16, which Hezbollah acknowledged, Israel has continued to attack the capital of Beirut and other parts of Lebanon, killing more than 500 people since the cease-fire took effect, according to Lebanese officials. Further talks between Israel and Lebanon are set for May 14.

Iran has indicated that a cessation of Israeli attacks across the region is one of its red lines. Iran cited Israel’s attacks on Lebanon as a reason for keeping the Strait closed during its own cease-fire. And a new wave of Israeli attacks on Lebanon, which have killed more than 50 people over the weekend according to the Lebanese Health Ministry, could make Iran less open to further negotiations, analysts say.

“If Israel continues striking Hezbollah, Iran may find it politically impossible to continue talks with the United States,” says Mahmoudian. “A deal with Washington while Hezbollah is under sustained attack would make Iran appear to have abandoned one of its most important allies, damaging its credibility with Hezbollah and other regional partners.”