US President Donald Trump threatened on Monday to destroy Iran's Kharg Island, its crude oil export hub, along with oil wells and power plants, unless Tehran quickly accepted a deal to end the US-Israeli war.

The risk of further escalation, including a potential US ground operation to seize Kharg Island, is sending tremors through financial and energy markets, as well as neighbouring Gulf countries.

In a post on his Truth Social network, Trump voiced hope about US talks with a "more reasonable regime" in Tehran, an apparent reference to new leadership despite the failure of the month-long war to dislodge the Islamic republic.

But Trump warned that if a deal were not struck – including to reopen the vital Strait of Hormuz shipping lane – US forces would destroy "all of their Electric Generating Plants, Oil Wells and Kharg Island (and possibly all desalinisation plants!)."

Destroying civilian infrastructure such as power and water facilities would be illegal under international humanitarian law and could constitute a war crime, experts say.

Iran has previously threatened to retaliate by targeting energy infrastructure and desalination plants in its Arab neighbours in the Gulf that host the US military, such as the United Arab Emirates, Oman, Qatar and Saudi Arabia.

Showing it will not back down, an Iranian parliamentary committee voted to impose tolls on vessels through the Strait of Hormuz, the passageway through which one-fifth of global oil passes.

State television said Iran would forbid the United States and Israel from passing through.

The tolling plan for the strait has outraged the United States, which has spoken of creating a "coalition" to oppose it.

"No one in the world can accept it," Secretary of State Marco Rubio told Al-Jazeera.

"It sets an incredible precedent. So this means that nations can now take over international waterways and claim them as their own," Rubio said of the waterway the US president recently called the "Strait of Trump."

A Pakistani security official, whose country is trying to mediate in the war, said it appeared unlikely there would be direct US-Iran talks this week.

The White House said 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," Leavitt said in response to a reporter's question about the idea. His administration has requested an additional US$200 billion in funding for the war, which faces stiff opposition in the US Congress, which must approve new spending.

Benchmark oil prices extended gains on Monday, with Brent crude futures on course for a record monthly rise.

The spectre of a widening conflict grew over the weekend when Iran-backed Houthi rebels in Yemen fired missiles and drones at Israel.

Israel's military said two drones from Yemen had also been intercepted on Monday, and that Lebanon's Hezbollah had fired rockets at Israel.

The Houthis have previously threatened shipping through the Red Sea and the Suez canal, which requires vessels to travel through a narrow strait off Yemen's coast.

"The Houthis' ability to disrupt shipping through the Bab al-Mandeb strait, which accounts for roughly 12 percent of global trade, is the new key risk," said analyst Chris Weston at the Australian financial services firm Pepperstone.

In Lebanon, Israel continued to bombard Beirut's southern suburbs and the country's south, where an airstrike targeted an army checkpoint and killed a soldier.

The United Nations peacekeeping force in south Lebanon, where Israeli and Hezbollah forces are clashing, reported that two of its personnel were killed on Monday in "an explosion of unknown origin."

Another peacekeeper was killed on Sunday, with Indonesia confirming one of its soldiers had died.

Around the Middle East on Monday, there was no let-up in hostilities.

Israel said its air defence batteries responded to missiles launched from Iran, after earlier announcing it was striking military infrastructure across Tehran.

Israel also confirmed it had hit the Imam Hossein University in the capital, which it said was used by Iran's Islamic Revolutionary Guards Corps for advanced weapons research.

In Israel, emergency services reported a fire at an oil refinery in the northern port city of Haifa, which also suffered a blaze on March 19.

Kuwait condemned strikes on a power station and a desalination plant, which killed an Indian worker.

On the diplomatic front, Egyptian President Abdel Fattah al-Sisi, whose country is playing a role in mediating indirect talks between the US and Iran, appealed directly to Trump on Monday to find an off-ramp.

"Please, help us to stop the war, you are capable of it," Sisi told a press conference with Cypriot President Nikos Christodoulides in Cairo.

Egypt's foreign minister joined counterparts from Saudi Arabia, Turkey and Egypt in the Pakistani capital Islamabad on Sunday for talks on the crisis.

Trump has claimed to be in direct contact with senior Iranian figures who have not been identified publicly.

Rubio said there were "fractures" within the Islamic republic and voiced hope that the Iranian officials allegedly in contact with Washington had the "power to deliver."

But Iranian foreign ministry spokesman Esmaeil Baqaei again denied any negotiations, saying that the United States had sent only a request to talk via intermediaries including Pakistan.

Iranian leaders insist Trump's offer of talks is a smokescreen as he moves thousands of marines and paratroopers to the region for a possible ground invasion. (Agencies)



Edited by Cecil Wong