Iran has reached an agreement with the UAE to hand over sovereignty of disputed islands near the Strait of Hormuz in the Gulf, according to a report by US-based magazine Defense News.

Citing a high-level source in the UAE, it reported the two sides have been engaged in secretive talks via the Omani government, with a deal reached on the Greater and Lesser Tunb islands.

A deal was also being ironed out on the third island, Abu Musa, according to the source, with Iran retaining the sea-bed rights surrounding all three territories.

In December, Iranian Foreign Ministry spokeswoman Marziyeh Afkham said press reports about a hidden agenda for striking a deal with the UAE over the islands were merely “media hues and cries”.

“Iran’s sovereignty and territorial integrity is not negotiable at all and no change has been made in the country’s explicit and official positions,” she said.

The dispute over the islands has been one of the main issues fuelling tensions between Iran and the UAE government in Abu Dhabi.

The most recent chapter of this complex dispute goes back to 1971, the year the UAE was formed, when Tehran seized control of the islands of Abu Musa, Greater Tunb and Lesser Tunb after Iran and the UAE failed to agree on their sovereignty.