Senior US and Iranian officials met on Saturday in Islamabad with Pakistani intermediaries as a battered Tehran laid down its red lines that it said Washington must accept before face-to-face talks could take place to end their six-week-old war.
Pakistani Prime Minister Shehbaz Sharif on Saturday met with US Vice President JD Vance, and special envoys Steve Witkoff and Jared Kushner, the White House and Sharif's office said.
Hours earlier, the Iranian delegation led by Parliamentary Speaker Mohammad Baqer Qalibaf and Foreign Minister Abbas Araqchi also met with Sharif to determine the timing and manner of possible negotiations, according to local media.
Iranian state TV said Tehran's delegation had set out its red lines to Sharif, adding that these concerned the Strait of Hormuz, the release of Iran's blocked assets, the payment of war reparations, and a ceasefire to be enforced across the region.
"We will negotiate with our finger on the trigger," Iranian government spokesperson Fatemeh Mohajerani said on state TV. "While we are open to talks, we are also fully aware of the lack of trust; therefore, Iran's diplomatic team is entering this process with maximum caution." Earlier, a senior Iranian source told Reuters the US had agreed to release frozen assets held in Qatar and other foreign banks, but a US official swiftly denied the claim.
The Iranian source welcomed the alleged move as a sign of "seriousness" in the talks, in which Washington is pressing Tehran to reopen the Strait of Hormuz to international shipping.
Qatar's Foreign Ministry did not immediately respond to a request for comment on the assertion about frozen assets.
Iran is also demanding a ceasefire in Lebanon, where Israeli attacks on Iran-backed Hezbollah militants have killed nearly 2,000 people since the start of fighting in March.
Israel and the US have said the Lebanon campaign is not part of the Iran-US ceasefire.
Trump posted on social media on Friday that the only reason the Iranians were alive was to negotiate a deal.
"The Iranians don't seem to realize they have no cards, other than a short term extortion of the world by using international waterways. The only reason they are alive today is to negotiate!" he said.
Vance, speaking as he headed to Pakistan, said he expected a positive outcome but added: "If they're going to try to play us, then they're going to find the negotiating team is not that receptive."
The US delegation landed in two US Air Force planes at an air base in Islamabad on Saturday morning, where they were received by Pakistan's army chief, Field Marshal Asim Munir, and Foreign Minister Ishaq Dar.
Islamabad, a city of just over two million people, was under an unprecedented lockdown ahead of the talks with thousands of paramilitary personnel and army troops on the streets.
The hardline Iranian delegation arrived on Friday dressed in black in "mourning" for Supreme Leader Ayatollah Ali Khamenei and other Iranians killed in the war. They carried shoes and bags of some of the students killed during a claimed but unverified US bombing of a school (located next to a military compound, in a tactic favoured also by Hezbollah), the Iranian government said on social media.
If the two sides hold face-to-face negotiations as expected, they would be the highest-level US-Iran talks since the Islamic Revolution of 1979 and the first direct talks since 2015, when they reached a deal on Iran's nuclear programme.
Trump scrapped the nuclear deal in 2018 during his first term in office.
The US president announced a two-week ceasefire in the war on Tuesday, halting US and Israeli airstrikes on Iran, but it has not ended Iran's blockade of the Strait of Hormuz, which has caused the biggest-ever disruption to global energy supplies, or calmed the parallel war between Israel and Hezbollah terrorists in Lebanon.
For the talks in Islamabad to succeed, the US and Iran should represent the views of their allies, said Bilawal Bhutto Zardari, Chairman of the Pakistan People's Party, a government ally, and a former foreign minister.
Israel and the US attacked Iran on February 28. Iran's regional allies Hezbollah in Lebanon and later Yemen's Houthis responded by launching missiles at Israel.
"It is so important that the framework for these negotiations ensures that not only Iran and the United States, but also all of their allies, come under the umbrella of the ceasefire," Bhutto Zardari said.
Tehran's agenda also includes the acknowledgment of its authority over the Strait of Hormuz, where it aims to collect transit fees and control access. The strait is a chokepoint for about 20 per cent of global oil and liquefied natural gas shipments.
Disruption to energy supplies has fed inflation and slowed the global economy, with an impact expected to last for months even if negotiators succeed in reopening the strait. Iran's new supreme leader, the Islamic extremist Ayatollah Mojtaba Khamenei, in hiding and said to be suffering from severe facial and leg injuries sustained in the attack that killed his father, has optimistically said Iran will demand compensation for all wartime damage.
(Reporting by Reuters bureaus; Writing by Raju Gopalakrishnan and Charlie Devereux; Editing by William Mallard and Gareth Jones)