Iran and the United Arab Emirates (UAE) are close to reaching a deal on returning three Iranian-occupied islands in the Arabian Gulf to the UAE, Defense News daily reported on Monday.

The newspaper quoted sources close to the negotiations as saying that "a deal for the return of the strategic islands to the UAE was laid out during the recent visit of UAE Foreign Minister Sheikh Abdullah bin Zayed al Nahyan to Tehran, and a response was presented during last week’s return visit by his Iranian counterpart, Mohammed Javad Zarif."

"The strategically located islands of Abu Musa and the Greater and Lesser Tunbs are close to the Strait of Hormuz, the world’s most important oil chokepoint. The islands were occupied by Iran’s Shah Mohammad Reza Pehlavi less than 48 hours before the declaration in 1971 of the establishment of the United Arab Emirates," the newspaper explained.