Escalation sparks fears for Gulf shipping

Iran's Revolutionary Guards said on Monday they had struck U.S. military assets across the Middle East after another night of U.S. bombardment of Iranian cities, part of a cycle of attacks that has all but wrecked an interim ceasefire agreement.

Oil prices briefly jumped above $90 a barrel after renewed disruption to shipping through the Strait of Hormuz, but later pared gains after Iran's Foreign Ministry said mediators had recently presented proposals to Tehran, signalling that diplomatic contacts remain active.

U.S. President Donald Trump, under mounting political pressure at home over rising gasoline prices, defended the latest strikes on Iran as retaliation for the deaths of as many as three American service members in recent Iranian attacks.

The conflict has also escalated with attacks on desalination facilities, raising the prospect of water shortages across parts of the Gulf and opening a new front in a war that is increasingly threatening civilian infrastructure.

Bahrain's Civil Aviation Authority said on Monday that Iran had targeted the kingdom's civil air navigation systems, but that operations and air traffic were proceeding normally.

IRAN SAYS TANKERS EXPLODED

The Islamic Revolutionary Guard Corps (IRGC) said two oil tankers had "exploded" and were immobilised after attempting to transit the strait via an "unsafe" route. On Sunday, the IRGC had said two ships were involved in an "accident" in the same area. It was unclear whether the two incidents were related.

Reuters could not immediately verify the incident. The IRGC statement gave no details about the vessels or any casualties.

Separately, a vessel was struck by an unknown projectile off Oman's coast, overlooking the Strait of Hormuz, the United Kingdom Maritime Trade Operations agency said. The vessel remains adrift but the crew are safe, it said.

In a statement, U.S. Central Command said its ninth consecutive night of strikes against Iran aimed at "degrading" the country's ability to attack commercial vessels in the strait's vital shipping lanes. It gave no further details.

Iran's semi-official Tasnim news agency said U.S. missiles had struck several Iranian cities early on Monday.

Explosions were reported in Tabriz, Chabahar, Konarak, Bandar Mahshahr and Bandar Imam Khomeini. One person was killed and several others wounded southwest of Tabriz, according to state news agency IRNA.

The IRGC said it targeted U.S. aircraft at Jordan's Aqaba airport with ballistic missiles, as well as military assets at Kuwait's Al-Adiri camp and Ali Al Salem Air Base, and positions in Syria.

Sirens sounded in Bahrain on Monday morning, while Kuwait's army said it intercepted hostile drones during an Iranian attack.

DESALINATION PLANT ATTACKED 

Kuwait's government said a desalination plant had been attacked on Sunday for the second day running, causing a fire, in what it called a direct strike on vital civilian infrastructure.

Desalination facilities supply most drinking water in many Gulf states, serving tens of millions of people in one of the world's driest regions.

Iran, which accused the United States on Saturday of hitting one of its own desalination plants, has repeatedly said it would target such plants in Gulf states in retaliation for U.S. attacks on its energy infrastructure. The U.S. did not confirm that it had struck an Iranian desalination facility.

U.S., IRAN DON'T RULE OUT RETURN TO DIPLOMACY

U.S. Secretary of State Marco Rubio vowed that the United States would continue to target Iran as long as it attacked global commercial shipping.

"As long as Iran insists on controlling an international waterway, we're gonna have to respond to that. The United States always remains open to a diplomatic solution," Rubio said.

Iran's Foreign Ministry signalled that Tehran also did not rule out a return to diplomacy when asked if the door to talks with the U.S. was now closed.

Confirming that Tehran had received "proposals" from mediators, ministry spokesperson Esmaeil Baghaei said he could not provide details. "The main point is that in recent days, both the diplomatic apparatus has been active and ideas from some mediators have reached us," he added.

Baghaei also said Iran's interior minister would hold talks on Monday in Pakistan - the main mediator between Tehran and Washington since the start of the conflict - though he said it was a visit focused on bilateral issues.

The conflict, which began when the U.S. and Israel attacked Iran on February 28, seeking to disable Tehran's nuclear and missile programs and weaken its regional proxies, has killed thousands of people, mostly in Iran and Lebanon.

PAIN AT THE GAS PUMP

U.S. gasoline pump prices crossed the $4 a gallon mark on Monday, a price point of financial pain for households. They had dipped below that threshold in June after the U.S. and Iran signed their memorandum of understanding to end the war.

Trump's Republican Party faces the risk of a voter backlash in midterm congressional elections in November.    

The U.S. military said two service personnel died in Jordan on Friday and that a third was missing in action. On Sunday, Central Command said that "unidentified remains" had been found at the site of Friday's attack and that "an examination process to verify the remains is ongoing".

Trump said the campaign against Iran was achieving its aims.

"Iran has been very, very badly damaged... We control the strait. They don't control anything... But we hit them very hard again tonight. And we did that in honor of the — probably three, it's probably three, as opposed to two — great patriots."