But a fee is yet to be agreed for former Everton centre-half Mustafi, leaving Arsenal short of options.
Per Mertesacker and Gabriel's long-term injuries means a senior face is required in the back line.
Watford vs Arsenal - Premier League match preview
And a move for Mustafi appears still possible, as according to Sky Sports journalist Kaveh Solhekol, a meeting has been held at Valencia over his potential exit.
It is claimed the 24-year-old and his agent met with Valencia officials on Tuesday, where he was informed he can leave this summer if an "adequate offer" is made.
Arsenal could apparently even agree a deal at £26million.
Mustafi & agent met Valencia officials yesterday. Told he can leave if adequate offer made. Suggestion Arsenal deal could be agreed at £26m
We use your sign-up to provide content in ways you've consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. Read our Privacy Policy
The La Liga side's manager is determined to keep hold of the defender, outlining on Monday night: "Mustafi is not for sale and will not be leaving the club."
However, with Arsenal having explored alternatives to the German such as West Brom's Jonny Evans, an agreement with Valencia may yet be reached with Mustafi reportedly keen to join the Gunners.