The US is pushing for other countries to form an international coalition to restore freedom of navigation in the Strait of Hormuz, according to a State Department cable seen by Reuters, as oil prices surged to their highest in more than four years on fears of longer-term disruptions to global fuel supplies.
Two months into the war that started with US-Israeli strikes on Iran, the vital sea channel remains closed, choking off 20% of the world's supplies of oil and gas. That has sent global energy prices surging and heightened concerns about the risks of an economic downturn.
Efforts to resolve the conflict have hit an impasse, which the United States is trying to unlock with a naval blockade of Iran's oil exports, the country's economic lifeline.
With talks stalled, US President Donald Trump is slated to receive a briefing on Thursday on plans for a series of fresh military strikes on Iran in hopes it will return to negotiations, according to an Axios report late on Wednesday.
That spurred big gains in oil prices, with the benchmark Brent crude contract topping $125 a barrel at one point, partly on technical factors related to the expiry of the contract later on Thursday.
Since the start of the year, Brent prices have more than doubled, rising on Thursday to their highest since March 2022, fuelling inflation and sending pump prices to politically painful levels worldwide.
Iran has pledged to continue disrupting traffic through the Strait as long as it is threatened, which may mean more Middle East oil supply disruptions from a conflict that has killed thousands.
Tehran warned on Wednesday of "unprecedented military action" against continued US blockading of Iran-linked vessels. Trump has said Iran cannot have a nuclear weapon, while Tehran says its nuclear ambitions are peaceful.
"They don't know how to sign a non-nuclear deal. They'd better get smart soon!" Trump said in a social media post on Wednesday, without explaining what such a deal would entail.
The post featured a mock-up image of him wearing dark glasses and wielding a machine-gun, captioned, "No more Mr. Nice Guy."
With Washington and Tehran trading public threats, mediator Pakistan was trying to avoid escalation while the two sides exchange messages on a potential deal, a Pakistani source said on Wednesday.
Trump held talks on Tuesday with oil executives and "discussed the steps President Trump has taken to alleviate global oil markets and steps we could take to continue the current blockade for months if needed and minimize impact on American consumers," a White House official said.
Uranium dispute, economy under pressure
The war has cost the US military $25 billion so far, a senior Pentagon official said, providing the first official estimate of the price tag for the conflict.
The State Department cable said the United States was inviting other countries to join a new international coalition that would enable ships to navigate the Strait of Hormuz after traffic through the waterway stalled.
The proposed coalition, dubbed the "Maritime Freedom Construct", would share information, coordinate diplomatically and help enforce sanctions, the cable showed.
France, Britain and other countries have held talks on contributing to such a coalition but said they were only willing to help open the Strait after hostilities cease.
Iran wants US acknowledgment of its right to enrich uranium for what it says are peaceful, civilian purposes. It has a stockpile of about 440kg (970 lbs) of uranium enriched to 60%, which could be used for several nuclear weapons if further enriched.
Iran's parliament speaker and top negotiator, Mohammad Baqer Ghalibaf, said Trump was trying to divide Iranians and force Iran to surrender through the blockade.
"The solution for confronting the enemy's new conspiracy is only one thing: maintaining unity, which has been the bane of all the enemy's conspiracies," Ghalibaf said in an audio message on messaging app Telegram.
Iran has executed at least 21 people since the start of the war with the United States and Israel two months ago, and arrested more than 4,000 on charges related to national security, UN human rights chief Volker Turk said on Wednesday.
In a sign of the toll the war is taking on Iran's economy, its currency fell to a record low on Wednesday, the Iranian Students' News Agency said. Inflation stood at 65.8% for the month to April 20, the central bank said.
Iran wants formal end to conflict first
Iran's latest offer for resolving the war, suspended since April 8 under a ceasefire deal, would set aside discussion of its nuclear program until the conflict is formally ended and shipping issues resolved.
That did not meet Trump's demand to tackle the nuclear issue at the outset.
The Pakistani source said the United States had shared "observations" on the Iranian proposal and it was now up to Iran to respond.
"(The) Iranians asked for time till the end of the week," the source told Reuters.
US intelligence agencies, tasked by senior administration officials, are studying how Iran would respond if Trump were to declare a unilateral victory, two US officials and a person familiar with the matter said.
Tehran has largely blocked all shipping apart from its own from the Gulf through the Strait of Hormuz, since the US and Israel began airstrikes on Iran on February 28. The US began its blockade this month.
Iran no longer has a single, undisputed clerical arbiter at the pinnacle of power since the strikes killed several senior political and military figures, including Supreme Leader Ayatollah Ali Khamenei.
The elevation of Khamenei's wounded son, Mojtaba, to replace him has handed more power to hardline commanders of the elite Islamic Revolutionary Guard Corps, Iranian officials and analysts say.
Meanwhile, Trump faces domestic pressure to end a war for which he has given shifting rationales to a US public struggling with surging gasoline prices.
His approval rating fell to the lowest of his current term, a Reuters/Ipsos poll showed.
