Saudi Arabia and Qatar are close to a deal to end the diplomatic crisis in the Gulf following U.S.-mediated reconciliation talks this week, sources familiar with the talks tell me.

Why it matters: Restoring relations between Saudi Arabia and Qatar would bring a sense of stability back to the Gulf after a 3.5 year standoff. It could also notch a last-minute achievement for the Trump administration before Jan. 20.

Background: In June 2017, Saudi Arabia, the UAE, Bahrain and other Sunni states severed ties with Qatar and closed their airspace and sea routes to Qatari planes and vessels. They claimed their decision was based on Qatar's support for terror groups and relations with Iran.

Driving the news: Jared Kushner, White House envoy Avi Berkowitz and special adviser Brian Hook travelled earlier this week to Saudi Arabia and Qatar to try and hammer out a deal. Those talks yielded significant progress, the sources say.

• The White House and the State Department have been working with the Kuwaiti government to try and solve the remaining disputes between the Saudis and the Qataris.
• Kuwaiti Foreign Minister Sheikh Ahmad Nasser al-Sabah issued a statement today hinting a deal is near. Both Saudi Arabia and Qatar welcomed the statement.

What they're saying: The Foreign minister of Kuwait said the talks were constructive and all parties were committed to working towards solidarity and stability in the Gulf with the aim of finalizing an agreement. al-Sabah thanked Kushner for his efforts.

• Qatari Foreign Minister Mohammed bin Abdulrahman al-Thani said the sides had taken “an imperative step towards resolving the Gulf crisis." He added, "The interest and security of the people of the Gulf and the region remain our top priority."
• Saudi Foreign Minister Faisal bin Farhan Al Saud said he was "optimistic a deal is within reach."

Between the lines: The Trump administration has been pushing the Saudis in recent months both to normalize relations with Israel and to make a deal with Qatar.

• A former U.S. official, who is in touch with both Saudis and Qataris, told me the Saudis thought that it would be more manageable domestically — and more beneficial regionally — to end the crisis with Qatar.
• Moreover, the progress in the talks comes as Saudi Arabia is preparing for the Biden administration to assume office. Relations are likely to be tense, and the Saudis want to enter with as clean a slate as possible.

What’s next: Talks will continue in the coming days to anchor down the agreement and get buy-in from the other Gulf states and other countries in the region, the sources say.