Iran attacked and set ablaze a fully-loaded crude oil tanker off Dubai this morning, as President Donald Trump warned the US would obliterate Iran's energy plants and oil wells if it does not open the Strait of Hormuz.
The strike on the Kuwait-flagged Al-Salmi is the latest in a string of assaults on merchant vessels by missiles or explosive air and sea drones in the Gulf and Strait of Hormuz since the US and Israel attacked Iran on 28 February.
The month-long conflict has spread across the Middle East, killing thousands, disrupting energy supplies and threatening to send the global economy into a tailspin.
Crude oil prices briefly spiked anew after the attack on the tanker, which can carry around 2 million barrels of oil worth more than $200 million (€174.3m) at current prices.
Kuwait Petroleum Corp, the ship's owner, said the attack happened early this morning, causing a fire and hull damage, but there were no reported injuries.
Authorities in Dubai later said they had been able to bring the fire under control following a drone attack on the tanker. No injuries have been reported, they said.
The jump in oil and fuel prices has started to weigh on US household finances and become a political headache for Mr Trump and his Republican Party ahead of the November midterm elections, having vowed to lower energy prices and ramp up US oil and gas production.
The US national average retail price of gasoline yesterday crossed $4 a gallon for the first time in more than three years, data from price-tracking service GasBuddy showed, as tightening global supplies push US crude prices above $101 a barrel.
Troops deploy as talks continue
Attacks by both sides are showing no signs of easing, with fears of a wider conflict growing.
Iran-aligned Houthis entered the war by firing missiles and drones at Israel in recent days and Turkey reported a ballistic missile launched from Iran had entered Turkish airspace before being shot down by NATO air and missile defences.
Israel carried out missile strikes on what it called military infrastructure in Tehran and infrastructure used by Iran-backed Hezbollah in Beirut, leaving black smoke hanging over the Lebanese capital.
Sounds of explosions were heard in parts of eastern and western Tehran minutes after Israel issued a warning of imminent strikes in the city, Iran's Tasnim news agency reported this morning. Residents in the eastern Pirouzi district reported power outages after the blasts, while officials from Iran's Energy Ministry began efforts to restore power, Tasnim added.
The Israeli military said early this morning that four soldiers had been killed in southern Lebanon, the same area as three United Nations peacekeepers from Indonesia were killed in two separate incidents in recent days.
Iran's military spokesman said on state television that targets in the latest wave of Tehran's missile and drone attacks included "hideouts" of US military personnel in five bases in the region and in Israel.
Thousands of soldiers from the US Army's elite 82nd Airborne Division have started arriving in the Middle East, two US officials told Reuters, part of reinforcements that would expand Mr Trump's options to include a ground assault in Iran, even as he pursues talks with Tehran.
White House press secretary Karoline Leavitt said Mr Trump wanted to reach a deal with Iranian leaders before a second deadline, now 6 April, for Iran to open the Strait of Hormuz, a narrow waterway that normally carries about a fifth of global oil and liquefied natural gas supplies.
Ms Leavitt said talks with Iran were progressing, adding that what Tehran says publicly differs from what it tells US officials in private.
Iran said yesterday that it had received US peace proposals via intermediaries, following weekend talks between the foreign ministers of Pakistan, Egypt, Saudi Arabia and Turkey.
Iranian Foreign Ministry spokesperson Esmaeil Baghaei said the proposals were "unrealistic, illogical and excessive".
"Our position is clear. We are under military aggression. Therefore, all our efforts and strength are focused on defending ourselves," he told a press conference.
Fresh Trump threats
Soon after Mr Baghaei's remarks, Mr Trump said the US was in talks with a "more reasonable regime" to end the war in Iran, but also issued a new warning over the Strait of Hormuz.
"Great progress has been made but, if for any reason a deal is not shortly reached, which it probably will be, and if the Hormuz Strait is not immediately 'Open for Business,' we will conclude our lovely 'stay' in Iran by blowing up and completely obliterating all of their Electric Generating Plants, Oil Wells and Kharg Island," Mr Trump wrote in a social media post, also threatening to attack Iranian desalination plants.
However, the Wall Street Journal reported Mr Trump had told aides he is willing to end the military campaign even if the strait remains largely closed and leave a complex operation to reopen it for a later date. That helped oil prices retreat and lifted stock markets off their lows as investors hoped for some way for hostilities to end swiftly.
Asked about the report, the White House referred to comments made by Secretary of State Marco Rubio, who told Al Jazeera the strait would be open "one way or another" after the US military operation.
The White House said that Mr Trump was considering asking Arab nations to pay for the cost of the war. "It's an idea that I know that he has and something that I think you'll hear more from him on," Ms Leavitt said in response to a reporter's question about the idea.
His administration requested an additional $200 billion in funding for the war. The request faces stiff opposition in the US Congress which must approve new spending.
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