By Parisa Hafezi and Alexander Cornwell
DUBAI/TEL AVIV, March 10 (Reuters) – Iran’s Revolutionary Guards said on Tuesday they would not let any oil out of the Middle East until U.S. and Israeli attacks cease, prompting U.S. President Donald Trump to threaten to hit Iran “twenty times harder” if it blocked exports.
Despite the defiant rhetoric from both sides, investors placed strong bets on Tuesday that Trump would call off his war soon, before the unprecedented disruption it has caused to energy supplies causes a global economic meltdown.
After Trump described the war on Monday as ahead of schedule, the bulk of an historic surge in crude oil prices the previous day was reversed. Asian and European share prices staged a recovery on Tuesday from earlier precipitous falls.
Iran has refused to bow to Trump’s demand that it allow the United States to choose its new leadership, naming hardliner Mojtaba Khamenei as its new supreme leader to replace his father who was killed on the war’s first day.
But Trump held a press conference on Monday that appeared to reassure markets he would stop his war before provoking an economic crisis like the ones that followed the Middle East oil shocks of the 1970s.
He said the U.S. had already inflicted serious damage and predicted the conflict would end before the four weeks he had initially set out.
He has not defined what victory would look like, but on Monday stopped short of repeating declarations from previous days that Iran must accept an “unconditional surrender” and let him choose its leader.
UNPRECEDENTED DISRUPTION
The war has effectively halted shipments through the Strait of Hormuz, where a fifth of global oil and liquefied natural gas normally passes along Iran’s coast, a disruption to global energy trade with no modern precedent. As the blockage has persisted, producers have run out of storage in the Gulf and been forced to stop pumping.
After Iran choose its hardline new leader, oil prices briefly rose to nearly $120 a barrel on Monday in what would have been the biggest single day gain in history. But by 0930 GMT on Tuesday, Brent crude had settled back down to $90.67, suggesting traders now expected the disruption to be over soon.
Trump said on Monday evening that U.S. military might was sufficient to keep oil flowing. He said that if Iran blocks oil through the strait, “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.”
A spokesperson for Iran’s Islamic Revolutionary Guard Corps dismissed Trump’s remarks, saying Tehran would not allow “one litre” of Middle Eastern oil to reach the U.S. or its allies while U.S. and Israeli attacks continue.
“We are the ones who will determine the end of the war,” the spokesperson said.
In a later Truth Social 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.
QUICK END TO WAR COULD LEAVE IRAN’S LEADERS IN PLACE
Ending the war quickly and letting oil flows resume would appear to preclude toppling Iran’s leadership, which held large-scale rallies on Monday in support of the new supreme leader.
Many Iranians want change and some openly celebrated the death of the elder Khamenei, weeks after his security forces killed thousands of people to put down anti-government protests in Iran’s worst domestic unrest since the era of its 1979 revolution.
There has been little sign of anti-government activity since then, with opponents of the authorities saying it would be unsafe to protest while Iran is under attack.
Despite Trump’s repeated maximalist demands for a say in who runs Iran, U.S. administration officials have mostly said the war’s aim is to destroy Iran’s missile capabilities and nuclear programme.
Israel has been bolder in openly proclaiming its wish to see Iran’s clerical rulers toppled.
“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.
A source familiar with Israel’s war plans told Reuters the Israeli military was operating under the assumption that Trump could order an end to the war at any time and abruptly close off the window for further strikes.
Each day was another opportunity for the military to inflict more damage on Iran while still possible, the source said.
At least 1,332 Iranian civilians have been killed and thousands wounded, according to Iran’s U.N. ambassador, since the U.S. and Israel began airstrikes strikes across Iran at the end of February.
Scores of people have also been killed in intensive Israeli attacks on Lebanon to root out the Iran-backed group Hezbollah, which fired into Israel in solidarity with Iran.
Iranian retaliatory strikes on Israel have killed 11 people. Iran has fired with missiles and drones at Arab Gulf states that have struck U.S. military bases and diplomatic missions but also hit hotels, closed airports and damaged oil infrastructure.
Iranian Foreign Minister Abbas Araqchi said Tehran was unlikely to resume negotiations with the U.S., “because we have very bitter experience of talking with Americans”.
He cited U.S. officials who reported progress at nuclear talks days before Washington launched its air strikes.
“Still, they decided to attack us. So, I don’t think talking to the Americans anymore would be on our agenda,” he told PBS.
(Reporting by Reuters bureaux, Writing by Lincoln Feast and Peter Graff, Editing by Timothy Heritage)
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