When Katara first saw Zuko she hated him; he represented everything to her that was wrong with the world and with the war. He chased them around and made their lives miserable for a year, but eventually that mellowed out.
When Katara touched Zuko's scar in the crystal catacombs she had felt a surge of emotion - positive and almost loving emotion - it was all ripped apart when he once again chose to fight against the Avatar.
When Zuko joined their group and eventually won over her trust everything changed. She found herself looking for reasons to spend time with him, and usually alone. Any time they touched she felt that same connection and she also felt a yearning to deepen it.
She was afraid of the war, afraid of losing and afraid of Aang's attachment to her, so she ignored her longing for more time with Zuko. She tried to just be friends but found herself challenging him to spar when everyone else was out shopping or training elsewhere.
When they found Iroh and the rest of the White Lotus Katara noticed the way that Iroh watched her with Zuko. She wondered if he knew something, or if he was just happy that his nephew was finally making a change for the better.
The night before her and Zuko were to head off to face Azula Iroh found her. He sat down next to her, poured some tea and then watched the movements around them.
"I wonder how you would classify your relationship with my nephew. I don't mean to pry, but I have been watching you two and it seems there is more to it than appears."
Katara was startled and tried to calm down by sipping tea. He watched her thoughtfully as she tried to come up with an answer.
"I don't know. When he joined our group and earned out trust I started to feel...so warm and comfortable with him. It was like I've known him all my life, I can't describe it but it's like I...I crave him."
Iroh chuckled and continued to sip his tea. Zuko was heading toward them and when he sat down Iroh poured him some tea and then looked between the two of them.
"I believe you two may have known each other in a past life. I couldn't say what that entails or what the relationships were like, but they were very friendly."
With that he wished them goodnight and took his pot of tea with him. Zuko and Katara stared after him and then when he disappeared they started into their tea cups.
"I suppose, it's not the weirdest thing I've ever heard," Zuko said as he scratched at the back of his neck.
"No, of course not," Katara agreed as she fidgeted with her hair loops.
"I mean, it's not like we have to get married or anything."
"Well, I'm not even of marrying age so that's settled."They chuckled awkwardly and watched as everyone around them settled in for the night. It occurred to Katara that they should be doing the same but she didn't want to leave him - of course she never wanted to leave him.
"Would you, um, Zuko...would you stay with me tonight? Nothing like that, just company?" Katara asked.
Once their sleeping rolls were settled Zuko laid down next to Katara. He stayed on his back and waited to see how she would react. She quickly snuggled into his side and draped one arm over his chest. They didn't talk - everything they had to say had already crossed the other's mind - they laid in silence until they fell asleep
