Iran's Revolutionary Guards said on Tuesday they would not let any oil be shipped from the Middle East if US and Israeli attacks continue, prompting President Donald Trump to say the US would hit Iran much harder if it blocked exports.
The rhetoric did little to quell a fall in crude prices and a rally in global shares that followed Trump expressing confidence in a swift end to hostilities, even after Iran showed defiance by naming Mojtaba Khamenei as its new supreme leader.
Trump said on Monday the US had inflicted serious damage on Iran's military. He also predicted the conflict would end before the initial four-week time frame he had set out, although he has not defined what victory would look like.
Israel says its war aim is to overthrow Iran's system of clerical rule. "Our aspiration is to bring the Iranian people to cast off the yoke of tyranny," Israeli Prime Minister Benjamin Netanyahu said in a statement issued by his office on Tuesday.
"In the end, that depends on them. But there is no doubt that through the actions taken so far we are breaking their bones - and our hand is still extended," he said.
"If we succeed together with the Iranian people, we will bring about a permanent end - if such things exist in the life of nations." US officials have mainly said Washington's aim is to destroy Iran's missile capabilities and nuclear programme, but Trump has said the war can end only with a compliant Iranian government.
At least 1,332 Iranian civilians have been killed and thousands wounded, according to Iran's UN ambassador, since the US and Israel began air and missile strikes across Iran at the end of February.
Trump said US attacks could increase sharply if Iran sought to block tanker traffic through the Strait of Hormuz, which handles one-fifth of the world's oil supply.
“We will hit them so hard that it will not be possible for them or anybody else helping them to ever recover that section of the world," Trump told a press conference on Monday.
The Islamic Revolutionary Guards Corps said it would not allow any oil to leave the region if attacks from the US and Israel continue. "We are the ones who will determine the end of the war," a spokesperson said, describing Trump's comments as "nonsense", according to state media.
In a later social media post, Trump repeated his warning. "If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far," he said.
Saudi Aramco, the world's top oil exporter, warned on Tuesday of "catastrophic consequences" for global oil markets if the war continued to disrupt shipping in the Strait of Hormuz.
The strait is the world's most vital oil export route, connecting the biggest Gulf oil producers with the Gulf of Oman and the Arabian Sea. The war has already effectively shut the Strait of Hormuz, leaving tankers unable to sail for more than a week and forcing producers to halt pumping as storage facilities fill.
Iranian Foreign Minister Abbas Araqchi said Tehran was unlikely to resume negotiations with the US, which he said had spoken of progress after three rounds of talks. "Still, they decided to attack us. So, I don't think talking to the Americans anymore would be on our agenda any more," he said in an interview with PBS.
The appointment on Monday of Mojtaba Khamenei to succeed his slain father, Ayatollah Ali Khamenei, appeared to dash hopes of a swift end to the war, sending oil markets surging and share markets nosediving.
Markets swung in the other direction when Trump predicted a quick end to the war and after reports of a possible ease in sanctions on Russian energy.
After speaking with Russian President Vladimir Putin, Trump said the US would waive oil-related sanctions on "some countries" to ease the shortage. According to multiple sources, that could mean a further easing of sanctions on Russian oil, which could complicate efforts to punish Moscow for its war in Ukraine.
Other options include a possible release of oil from strategic reserves or restricting US exports, sources said.
Brent crude futures fell more than 10 per cent on Tuesday after soaring by as much as 29 per cent on Monday to their highest since 2022. Global stock markets also bounced.
(Reporting by Reuters bureaux, Writing by Lincoln Feast; Editing by Michael Perry and Timothy Heritage)