US President Donald Trump on Monday threatened to escalate the war with Iran if it blocked oil shipments from the Middle East, even as he predicted a quick end to the conflict.
Trump's warning came at the end of a day that saw global financial markets seesawing on concerns that Iran's security establishment was rallying behind new Supreme Leader Mojtaba Khamenei and was not prepared to back down any time soon.
Trump said the United States had inflicted serious damage on Iran's air force and navy and predicted the conflict would end well before the initial four-week time frame he had laid out, though he has not defined what victory would look like.
He warned that US attacks could rise 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 said at a news conference.
In response, Iran's Revolutionary Guards said it would not allow "one liter of oil" to leave the region if attacks from the United States and Israel continue.
"We are the ones who will determine the end of the war," a spokesperson said, according to state media.
The conflicting signals sent markets on a rollercoaster, with oil prices surging and stock markets nosediving before swinging in the other direction after Trump's prediction of a quick end to the war and reports of a possible ease in sanctions on Russian energy.
Khamenei, 56, a cleric with a power base among the security forces, has been declared unacceptable by Trump, who has demanded Iran's unconditional surrender.
Iranian state media showed large crowds in several cities rallying behind the new leader, waving Iranian flags and holding portraits of his father Ali Khamenei, the supreme leader killed by an Israeli strike on the war's first day.
In Isfahan, state TV reported the sound of nearby explosions from apparent airstrikes as loyalists gathered in the historic Imam Square, chanting "God is the Greatest" below a stage with portraits of Ali and Mojtaba Khamenei.
Israel says its war aim is to overthrow Iran's system of clerical rule. US officials mainly say 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.
Israel had said it would kill whoever succeeded the elder Khamenei unless Iran ended its hostile policies.
The war has effectively shut the Strait of Hormuz, a chokepoint for global oil and liquefied natural gas transport, leaving tankers unable to sail for more than a week and forcing producers to halt pumping as storage fills.
Brent crude futures LCOc1 jumped about 7% to settle at their highest price since 2022 after soaring by as much as 29% during the session, as Saudi Arabia and other OPEC members cut supplies. But prices fell in post-settlement trade.
The price of gasoline has particular political resonance in the United States, where voters cite rising costs as a top concern ahead of the November midterm elections, when Trump's Republicans will try to keep control of Congress.
A Reuters/Ipsos poll released Monday found 67% of Americans expect gas prices to rise over the coming months, and only 29% approve of the war.
After speaking with Russian President Vladimir Putin, Trump said the United States will 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.
