WASHINGTON: US President Donald Trump expressed confidence that an agreement could soon be reached to end the Iran war and urged the Tehran-aligned Hezbollah group to hold its fire as a 10-day truce came into effect between Lebanon and Israel.

Trump said the next meeting between the United States and Iran could take place at the weekend and an extension of a two-week ceasefire was possible, but may not be needed as Tehran wanted a deal.

"We're going to see what happens. But I think we're very close to making a deal with Iran," he told reporters outside the White House, adding that if an agreement was reached and signed in the Pakistani capital Islamabad, he may go there for the occasion.

Hours later, while in Las Vegas, Trump went further, saying the war "should be ending pretty soon".

The war with Iran has been unpopular in the United States and has left Trump with a political headache just months before a crucial midterm election at home.

The US-Israeli attack on Iran that started on Feb 28 has triggered the worst oil price shock in history and led to an International Monetary Fund downgrade of its outlook for the global economy and a warning that prolonged conflict could push the world to the brink of recession.

A Pakistani source involved in mediating between the US and Iran said on Friday there was progress in backdoor diplomacy and that an upcoming meeting between the two sides could result in the signing of an agreement.

The two sides would first sign a memorandum of understanding, followed by a comprehensive agreement within 60 days, the source said.

"Detailed agreement comes later. Both sides are agreeing in principle. And technical bits come later," the source said, speaking on condition of anonymity.

A diplomatic source said the key Pakistani mediator, army chief Field Marshal Asim Munir, had been holding talks in Tehran since Wednesday and had made a breakthrough on "sticky issues".

OIL PRICE FALLS ON DEAL HOPES

Oil prices fell in early trade on Friday, and Asian stocks headed for a second week of strong gains on optimism that the Middle East conflict could be nearing an end, even though the critical Strait of Hormuz, an artery for a fifth of the world's oil and gas supply, remains effectively closed.

The MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.8 per cent as investors locked in profits after a blistering rally this month, with the index close to its highe...