President Donald Trump has dismissed Iran's response to US proposals to end the war as "totally unacceptable".
Iran's semi-official Tasnim news agency said Tehran's proposal, sent via Pakistan, which has served as a mediator, included an immediate end to the war on all fronts, a halt to the US naval blockade of Iranian ports and guarantees of no further attacks on Iran.
A ceasefire meant to facilitate talks to end the war launched by the US and Israel in February has been largely observed, despite occasional exchanges of fire.
Earlier this week, Trump repeated that the war in Iran will be "over quickly".
But Israeli Prime Minister Benjamin Netanyahu said that Iran's stockpile of enriched uranium must be "taken out" before the war against Iran can be considered over.
"There's still enrichment sites that have to be dismantled," Netanyahu said in an interview on CBS's 60 Minutes show.
According to Iranian state media, Tehran's proposal includes a demand for compensation for war damage and an emphasis on Iranian sovereignty over the Strait of Hormuz.
On Sunday, Iranian President Masoud Pezeshkian did not directly reference Tehran's proposal but said: "We will never bow our heads before the enemy, and if talk of dialogue or negotiation arises, it does not mean surrender or retreat."
Trump posted on Truth Social: "I have just read the response from Iran's so-called 'Representatives.' I don't like it - TOTALLY UNACCEPTABLE."
US news outlet Axios reported that the one-page, 14-point US memorandum includes provisions such as a suspension on Iranian nuclear enrichment, the lifting of sanctions, and restoring free transit through the Strait of Hormuz.
It cited two US officials and two other sources - all unnamed - whom it described as briefed on the issues. These sources were reported as saying that many of the terms laid out in the memo would be contingent on a final agreement being reached.
Iran has continued to block the strategic strait, prompting a rise in world oil prices. Normally about 20% of the world's oil and liquefied natural gas passes through the strait.
The US, for its part, has been enforcing a blockade of Iranian ports to exert pressure on Tehran to agree to its terms - a move that has infuriated Iran.
Israeli and US forces began massive air strikes on Iran on 28 February. A ceasefire in the Iran war came into effect last month.
In his CBS interview, Netanyahu also said he wanted to "draw down to zero" American financial support for Israel's military.
"We receive $3.8 billion a year. And I think that it's time that we weaned ourselves from the remaining military support," he said, adding: "Let's start now and do it over the next decade."
Iran has warned its neighbours about complying with US sanctions.
Military spokesman Mohammad Akraminia said vessels passing through the Strait of Hormuz would face "severe consequences" if they did not co-operate with Tehran first, Irna news agency reported.
Akraminia said Americans "will never be able to turn this vast expanse in the northern Indian Ocean into a real blockade by covering it with their fleet".
The US has a significant military presence across the Gulf, with bases in Qatar, Bahrain, Kuwait, the UAE, Saudi Arabia and Oman.
It was announced on Saturday that the British Royal Navy was sending a warship to the Middle East, where it could join an international mission to safeguard shipping in the Strait of Hormuz.
UK Prime Minister Sir Keir Starmer, who together with French President Emmanuel Macron is championing the shipping mission, has said it would only take place once fighting in the region ends.
In response, Iran on Sunday warned of a "decisive and immediate response" to any French or British deployments in the strait.
Macron then said that France had "never envisaged" a naval deployment but rather a security mission that would be "co-ordinated with Iran".
Iran has also retaliated against Arab allies of the US in the Gulf.
The UK's Maritime Trade Operations Centre (UKMTO) - which monitors international shipping routes - said a bulk carrier had been "hit by an unknown projectile" about 23 nautical miles (43km) north-east of Doha in Qatar, causing a small fire but no casualties.
Iran's Fars news agency later cited an unidentified source as saying that the vessel had been "sailing under the US flag and belonged to the United States".
Also on Sunday, Kuwait said drones had entered its airspace and that the military had "dealt with them".
Hours later, the UAE said its air defences had intercepted two drones coming from Iran.
Defence ministers from more than 40 nations will meet on Monday to discuss UK-led plans to protect shipping in the strait.
John Healey and his French counterpart Catherine Vautrin will co-chair the meeting, where the coalition partners are expected to outline how they might police maritime traffic once hostilities cease.
Trump wrote in a Truth Social post on 6 May that if Iran did not agree to a deal, "the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before".
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