NEW YORK: World oil prices dived Wednesday (May 6) and stock markets rallied on fresh hopes for an end to the Iran war.

US President Donald Trump said he believed a deal with Iran was "very possible", but threatened to resume his bombardment of the country if negotiations fell apart.

International oil benchmark Brent North Sea made a double-digit plunge to under US$100 a barrel, before cutting losses, finishing down 7.8 per cent at US$101.27 a barrel.

Major US indices extended a powerful rally, with both the S&P 500 and Nasdaq finishing at records for the second straight day. The Nasdaq gained two per cent.

European equities also got a boost, with the Paris exchange piling on gains of nearly three per cent and both Frankfurt and London ending the day up more than two per cent.

US news outlet Axios, citing two US officials, reported that both sides were close to agreeing on a one-page memorandum of understanding to end the war and set a framework for more detailed nuclear negotiations.

"The (Axios) news has ignited fresh optimism that we're moving in the right direction for global energy markets, which is supporting a broad risk-on move" into equities, noted Saxo UK investor strategist Neil Wilson.

"We've had very good talks over the last 24 hours, and it's very possible that we'll make a deal," Trump told reporters in the Oval Office.

Iranian foreign ministry spokesman Esmaeil Baqaei told local media that the "US plan and proposal are still under review", and that Tehran would convey its position to mediator Pakistan "after finalising its views".

But Mohammad Bagher Ghalibaf, Iran's parliament speaker who has taken the lead in negotiations with the US, warned Wednesday that Washington "is seeking, through a naval blockade, economic pressure and media manipulation, to destroy the country's cohesion in order to force us to surrender".

"We have been promised peace deals before, which have then failed to materialise, so while the market is willing to trade on the back of this deescalation, it will take further concret...