Israel's military chief has signaled a softening of his country's line on Iran, saying that he does not believe Iran will decide to produce an atomic bomb and describing its leadership as "very rational".
In the interview published on Wednesday in the Haaretz newspaper, Lieutenant-General Benny Gantz's characterisation of Iran's rulers appeared to be at odds with warnings from Binyamin Netanyahu, the Israeli prime minister, that Tehran's leaders might use nuclear weapons even at the risk of devastating retaliation.
"Iran is moving step-by-step towards a point where it will be able to decide if it wants to make a nuclear bomb. It has not decided yet whether to go the extra mile," said Gantz.
"In my opinion, [Iranian Supreme Leader Ayatollah Ali Khamenei] will be making a huge mistake if he does that and I don't think he will want to go the extra mile."
Israel, believed to have the Middle East's only nuclear arsenal, has long seen a nuclear Iran as an existential threat. Teheran denies seeking the bomb and says it is enriching uranium for peaceful purposes.
Both Israel and the US have declined to rule out military action against Iran should economic sanctions fail to curb its nuclear programme, saying all options were on the table.
But Seyed Mahmoud-Reza Sajjadi, Iran's ambassador to Russia, told the Bloomberg news agency on Wednesday that Tehran was considering a Russian proposal to halt the expansion of its nuclear programme in order to avert new sanctions.
This is a softening of the Iranian line, which held that the country, as a sovereign nation, has a right to a civilian nuclear programme.
It is also an about-face for Sajjadi who in February warned that Iran would "deliver retaliatory strikes on the United States anywhere in the world".
The Russian proposal asks that as a start, Iran freeze the number of centrifuges for uranium enrichment at current levels and place other restrictions on its centrifuge use. In return, global powers would refrain from imposing new sanctions on Tehran.
Reza Marashi, research director of the National Iranian American Council, said that he "wouldn't be surprised" if Iran were willing to consider and negotiate the proposal.
"This tracks closely with many of the feelers that the Iranian government has been putting out over the past few weeks," said Marashi, who describes the Iranian statement as "willingness to negotiate limitations".
Sajjadi's statement to Bloomberg, which was followed by a brief dip in crude oil futures, showed the fragile state of the global oil market and Iran's significant role in it.
"I don’t think that Iran has any interest in seeing [oil] prices fall since they are already struggling to sell their barrels. The latest Platts data shows they may be storing some 22 million barrels offshore that they cannot sell, mainly crude oil and the odd condensate cargo," Kate Dourian, Middle East editor at Platts, a firm that provides benchmark price assessments of energy markets, said.
She said that the longer the sanctions continue, the longer it will take for Iran to restore its market share, something it is losing to rapidly to Iraq, where oil production and imports are on the rise.
"Iran cannot afford to lose customers unless they can figure out a way to bypass sanctions. But, even then, they will not be able to place all the barrels they would otherwise have sold into Europe once the EU sanctions are in effect since a lot of refiners are shying away from doing business with Iran," said Dourian.
She added that Iran is facing difficulty in receiving payment for its oil due to banking sanctions.
Torbjorn Tornqvist, chief executive of oil trader Gunvor, said in an interview on Tuesday that Iran is experiencing "huge problems" exporting oil, but there is unlikely to be a sharp drop in volumes once the European Union oil embargo comes into effect on July 1.
He added that Iran will be the single most important factor determining oil prices in 2012.
Iran this month began negotiations over its nuclear programme with six world powers for the first time in more than a year, and has been hit with round after round of sanctions by the US, the EU and the UN, causing its currency to nose-dive against the US dollar and hiking inflation rates.
Western diplomats greeted Iran's first meeting with the United States, Russia, China, Germany, France and Britain with cautious optimism, and the two sides agreed to meet again in Baghdad on May 23.
Ehud Barak, the Israeli defence minister, last week voiced scepticism that negotiations will curb Teheran's nuclear ambitions.
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