By Parisa Hafezi, Alexander Cornwell and Bo Erickson DUBAI/TEL AVIV/WASHINGTON, March 12 (Reuters) - The United States and Iran have signaled no quick end to their war, with U.S. President Donald
Oil tankers burn as Iranian strikes defy Trump's claim to have won the war
Escalation of Conflict and Impact on Global Energy Markets
By Parisa Hafezi and Bo Erickson
Attacks on Oil Tankers and Regional Escalation
DUBAI/HEBRON, Kentucky, March 12 (Reuters) - Two tankers were ablaze in an Iraqi port on Thursday after a hit by suspected Iranian explosive-laden boats, a step up in attacks that have cut off oil from the Middle East and defied Donald Trump's claim to have won the war he launched two weeks ago.
Images verified by Reuters as having been filmed from the shore of the port of Basra showed ships engulfed in massive orange fireballs that lit up the night sky, after the attacks which Iraqi authorities blamed on Iranian boats. At least one crew member was killed.
Hours earlier, three other ships had been struck in the Gulf. Iran's Revolutionary Guards claimed responsibility for at least one of those attacks, on a Thai bulk carrier that was set ablaze, which the Guards said had disobeyed their orders. Another container vessel reported being struck by an unknown projectile near the United Arab Emirates on Thursday.
Casualties and Humanitarian Impact
The war that began with a U.S.-Israeli bombing campaign at the end of February has so far killed around 2,000 people and caused what the International Energy Agency describes as the biggest disruption to global energy supplies in history.
Global Energy Supplies Disrupted
GLOBAL ENERGY SUPPLIES DISRUPTED
Spread of Conflict and Oil Price Surge
Undermining U.S. and Israeli claims to have knocked out much of Iran's stock of long-range weapons, more drones were reported on Thursday flying into Kuwait, Iraq, the UAE, Bahrain and Oman. Lebanon's Iran-backed militia Hezbollah fired its biggest volley of rockets into Israel of the war, prompting fresh Israeli strikes on Beirut.
Oil prices soared back above $100 a barrel, having come down earlier in the week when Trump said the war would be over soon. Iran has said it will not let oil through the world's most important energy trade route - the Strait of Hormuz that runs along its coast - until U.S. and Israeli attacks cease. [O/R]
Banking Sector Response
Citibank announced on Thursday it would temporarily shut its branches in the UAE, a day after Iran said it considered banks to be legitimate targets and warned Middle East residents to stay 1,000 metres from them. HSBC has shut branches in Qatar.
Trump's Response and Political Implications
TRUMP SAYS 'WE WON'
Statements and Strategy
U.S. President Trump, whose Republican Party is trying to hold on to Congress in an election later this year, has repeatedly tried to calm energy markets this week by saying the surge in oil prices will be short-lived.
But he has not explained how the war will end, or presented a plan to reopen the blockaded strait. U.S. and Israeli officials say the aim is to destroy Iran's missile and nuclear programmes, but Trump has also demanded Iran's "unconditional surrender" and the power to determine its leaders.
Trump's Public Remarks
"You never like to say too early you won. We won," Trump told a campaign-style rally in Hebron, Kentucky, on Wednesday. "In the first hour it was over."
The United States had "virtually destroyed Iran", he said. But he added: "We don't want to leave early, do we? We got to finish the job."
Situation Inside Iran
Inside Iran, residents said security forces were increasing their presence on the streets, demonstrating their continued control.
"Security forces are everywhere, more than before. People are afraid to come out, but supermarkets are open," teacher Majan, 35, said by phone from Tehran.
Three sources told Reuters that U.S. intelligence indicated that Iran's leadership was still largely intact and not at risk of collapse any time soon.
Israel and the United States have called on Iranians to rise up and topple their clerical rulers. Many Iranians want change and some openly celebrated the death on the war's first day of Supreme Leader Ayatollah Ali Khamenei, whose security forces had killed thousands of anti-government protesters in January. But there has been no sign of organised anti-government activity while the country is under attack.
Tehran's Economic Strategy
TEHRAN SEEKS PROLONGED ECONOMIC SHOCK
Iran's Oil Price Leverage
Iran has made clear over the past two days that its strategy now is to impose a prolonged economic shock to force Trump to back off.
The spokesperson for Iran's military command said on Wednesday that the world should prepare for oil prices of $200 a barrel. The highest price in history was $147.27 in July 2008, weeks before the global financial crisis.
International Response and Oil Reserves
Thursday's surge in oil prices came despite the announcement the previous day that developed countries would release 400 million barrels of oil from their strategic reserves, nearly half from the United States.
That is by far the biggest-ever coordinated intervention into the oil markets. Trump said it would "substantially reduce oil prices as we end this threat to America and the world".
But releasing the reserves will take months, and account for just three weeks of supply from the blockaded strait.
Market Outlook
Futures contracts two and three months out suggest traders expect prices to ease in coming months, but far less quickly than they expected just days ago, despite the new promise of hundreds of millions of barrels from reserves.
"The only way to see oil prices trade lower on a sustained basis is by getting oil flowing through the Strait of Hormuz," ING analysts said. "Failing to do so means that the market highs are still ahead of us."
(Reporting by Parisa Hafezi in Dubai, Alexander Cornwell in Tel Aviv and Bo Erickson in HEBRON, Kentucky, and Reuters bureauxWriting by David Brunnstrom, Lincoln Feast, Peter GraffEditing by Michael Perry and Alex Richardson)
