US President Donald Trump sought to lower tensions with Iran, extending an olive branch to "start all over" with nuclear talks and even thanking Tehran for its "wise" decision not to shoot down a US military plane with personnel on board.

Trump's refusal to move forward with a military strike for the downing of a drone in the Gulf averted a potentially devastating new crisis as Iran and its proxy forces stood ready to retaliate against US targets across the region.

But the prospect for renewed conflict remains as the underlying problems fester.

Iran, furious about a raft of US sanctions imposed after Trump withdrew from the 2015 Iran nuclear deal, has shown no interest in renegotiating a new agreement with a Trump Administration that has worked to strangle its economy and prevent it from selling oil on the international market.


Trump has promised more sanctions, despite Iran insisting they must be lifted before any dialogue begins. He also approved an offensive cyberstrike that disabled Iranian computer systems used to control rocket and missile launches.

Analysts have said the combination of deep antagonism and the lack of a well-functioning diplomatic channel creates a combustible environment.

"Avoiding further escalation will be difficult, given both sides' determination not to back down," wrote Philip Gordon, a scholar at the Council on Foreign Relations in Foreign Affairs magazine. "A new nuclear negotiation, which Trump claims to want, would be one way to avoid a clash. But Iran is not likely to enter talks with an Administration it does not trust, and even less likely to agree to the sort of far-reaching deal Trump says is necessary."

US officials say they want a deal that has restrictions on Iran's nuclear programme that don't expire; bans all types of uranium enrichment; and reins in Tehran's regional ambitions and ballistic missile programme. But Iran sees the US as an aggressor bent on the country's economic collapse, to be followed by regime change.

- AP