US President Donald Trump said a deal to end the war with Iran is nearly complete and could be signed in Europe as soon as this weekend, even as Tehran cautioned that no final decision has yet been made on the proposed agreement.

Speaking to reporters at the Oval Office on Thursday, Trump said the documents were in their final stages and that Vice President J D Vance could attend the signing ceremony on behalf of the United States.

"We just made a great settlement of the war with Iran. The documents are in pretty final shape, so we'll see. It should be done pretty quickly," Trump said.

The proposed agreement would mark the most significant diplomatic breakthrough in efforts to end the three-month conflict, which has killed thousands and disrupted global energy markets.

Trump's announcement came hours after he called off planned military strikes on Iran, reversing an earlier threat to hit the country "VERY HARD" and take control of Kharg Island, Iran's main oil export hub. The US president said he had spoken with leaders of Qatar, the UAE, Saudi Arabia, Bahrain, Kuwait and Pakistan as negotiations advanced.

At a later tele-rally in support of Georgia Lieutenant Governor Burt Jones, Trump went further, declaring the conflict effectively over.

"I don't know if you heard, but we ended the war with Iran today (Thursday), and they have agreed never to have a nuclear weapon, something that we insisted on. That was the whole purpose," Trump said.

Trump reiterated that preventing Iran from obtaining nuclear weapons was the central objective of Washington's campaign against Tehran.

"They will not purchase, develop in any way, shape or form a nuclear weapon. They will not have a nuclear weapon," Trump said.

"The big thing is there will be no nuclear weapons in Iran. That means not developed and not purchased," he later added during the campaign event.

Asked how Iran had been persuaded to move closer to a deal, Trump said, "They've taken a pounding like very few people could take — and they want to make the deal a lot more than I do."

“Because they have taken a pounding. They got hit very hard,” he added.

Trump said the agreement would reopen the Strait of Hormuz, a critical global shipping route, once it is formally signed.

"The strait will officially open as soon as we sign, which could be soon, very soon, maybe over the weekend in Europe," Trump said, adding that Vance could sign for the United States.

"It's a very strong memorandum of understanding. That's a little conceptual, but it's something that's going to get done," Trump said.

"It's a very detailed memorandum of understanding," he added.

"It's a very strong memorandum of understanding that is a little conceptual," Trump also told reporters.

When asked whether Iran's Supreme Leader Ayatollah Mojtaba Khamenei had approved the deal, Trump said: "I understand the answer is yes."

However, Iran signalled that negotiations were still ongoing. Iranian media quoted foreign ministry spokesperson Esmaeil Baghaei as saying that while much of the text had been finalised, key decisions remained under review.

"We have not reached a final conclusion on this matter," Baghaei said. "This is a very important issue that is currently being reviewed by the relevant decision-making bodies."

Baghaei added that Iran would not compromise on its red lines during the negotiations.

Iran has consistently denied seeking nuclear weapons and has reportedly sought sanctions relief, the release of frozen assets and recognition of its control of the Strait of Hormuz as part of any agreement.

News of the potential deal boosted investor sentiment, with US stocks rising and oil prices falling amid expectations of reduced tensions in the region.

Over the past several weeks, Trump has repeatedly said that Washington and Tehran were close to reaching an agreement, though a formal deal had remained elusive despite continued negotiations and intermittent military exchanges.