Iran tells world to get ready for oil at $200 a barrel as it fires on merchant ships

• Summary

• Three ships hit in the Gulf

• IEA proposes biggest-ever release of strategic oil reserves

• Explosions in Bahrain and Dubai

DUBAI/TEL AVIV, March 11 (Reuters) - Iran said the world should be prepared for oil to hit $200 a barrel as its forces attacked merchant ships on Wednesday in the blockaded Gulf.

Iran also fired at Israel and targets across the Middle East ​on Wednesday, demonstrating it can still fight back despite what the Pentagon has described as the most intense U.S.-Israeli strikes yet.

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Oil prices that shot up earlier this week have eased and stock markets have ‌rebounded, with investors betting for now that U.S. President Donald Trump will find a quick way to end the war he began alongside Israel nearly two weeks ago.

Trump, who has repeatedly tried to reassure markets this week that the campaign will end soon, told Axios in a telephone interview that there was “practically nothing left” to target in Iran. “Little this and that… Any time I want it to end, it will end,” Trump said during a brief phone interview.

WORST ENERGY SUPPLY DISRUPTION SINCE 1970s

But so far there has been no let-up on the ground, or any sign ​that ships can safely sail through the Strait of Hormuz, where a fifth of the world’s oil has been blockaded behind a narrow channel along the Iranian coast in the worst disruption to energy supplies since the oil ​shocks of the 1970s.

The International Energy Agency, made up of major oil consuming nations, recommended releasing 400 million barrels from global strategic reserves to stabilise prices, the biggest such intervention ⁠in history, which was swiftly endorsed by Washington. But the rate at which countries can release it would account for just a fraction of the supply through the Hormuz Strait.

“Get ready for oil to be $200 a barrel, because the oil ​price depends on regional security, which you have destabilised,” Ebrahim Zolfaqari, spokesperson for Iran’s military command, said in comments addressed to the United States.

Oil prices, which shot up briefly to nearly $120 a barrel on Monday, have since settled around $90, suggesting investors are ​betting on a swift end to the war and reopening of the strait.

IRAN MAKES CLEAR IT INTENDS TO PROLONG ECONOMIC SHOCK

Iranian officials made clear on Wednesday they intended to impose a prolonged economic shock as the war carries on.

After offices of a bank in Tehran were hit overnight, Zolfaqari also said Iran would respond with attacks on banks that do business with the United States or Israel. People across the Middle East should stay 1,000 metres from banks, he added.

Iran’s Revolutionary Guards said their forces had fired on two ships in the Gulf that had ​disobeyed their orders. One, a Thai-flagged bulk carrier, was set ablaze, forcing the evacuation of crew, with three people reported missing and believed trapped in the engine room.

Reuters could not verify the second incident described by the Guards involving what ​they described as a Liberian-flagged ship. But two other ships, a Japanese-flagged container ship and a Marshall Islands-flagged bulk carrier, were reported to have sustained damage from projectiles.

The strikes raised the number of merchant ships that have been hit since the war began to ‌14.

Item 1 of 11 Debris and damaged vehicles at the site of an Israeli strike on an apartment building, in central Beirut, Lebanon. REUTERS/Emilie Madi

**[1/11]**Debris and damaged vehicles at the site of an Israeli strike on an apartment building, in central Beirut, Lebanon. REUTERS/Emilie Madi Purchase Licensing Rights, opens new tab

A senior Israeli official ⁠told Reuters Israeli leaders now privately accepted that Iran’s ruling system could survive the war. Two other Israeli officials said there was no sign Washington was close to ending the campaign.

IRANIAN OFFICIAL SAYS MOJTABA KHAMENEI LIGHTLY WOUNDED

In the latest public display of defiance, huge crowds of Iranians took to the streets on Wednesday for funerals for top commanders killed in airstrikes. They carried caskets and brandished flags and portraits of slain Supreme Leader Ayatollah Ali Khamenei and his son and successor, Mojtaba.

An Iranian official told Reuters that Mojtaba Khamenei had been lightly wounded early in the war, when airstrikes killed his father, mother, wife and a son. He has not appeared in public or issued any direct message since the war began.

The Iranian military said on Tuesday ​it had launched missiles at targets including a U.S. base ​in northern Iraq, the U.S. naval headquarters for the ⁠Middle East in Bahrain, and at targets in central Israel. Explosions rang out in Bahrain, while in Dubai four people were wounded by two drones that crashed near the airport.

In Tehran, residents said they were growing accustomed to nightly airstrikes that have sent hundreds of thousands of people fleeing to the countryside and contaminated the city with black rain from oil ​smoke.

“There were bombings last night but I did not get scared like before. Life goes on,” Farshid, 52, told Reuters by phone.

‘NO TIME LIMIT’, SAYS ISRAEL

U.S. and Israeli officials ​say their aim is to ⁠end Iran’s ability to project force beyond its borders and destroy its nuclear programme, though they have also invited Iranians to topple the country’s clerical rulers.

Israel’s Defence Minister Israel Katz said on Wednesday the operation "will continue without any time limit, as long as required, until we achieve all objectives and win the campaign”.

But the longer the war goes on, the greater the risk to the global economy, and if it ends with Iran’s system of clerical rule surviving, Tehran is certain to declare victory.

Iran’s police chief, Ahmadreza ⁠Radan, said on ​Wednesday anyone taking to the streets would be treated “as an enemy, not a protester. All our security forces have their fingers on the trigger”.

A line chart of the percent change in price of energy commodities since Trump’s election

More ​than 1,300 Iranian civilians have been killed since the U.S. and Israeli airstrikes began on February 28, according to Iran’s U.N. ambassador, Amir Saeid Iravani. Scores have also been killed in Israeli attacks on Lebanon.

Iranian strikes on Israel have killed at least 11 people and two Israeli soldiers have died in Lebanon. ​Washington says seven U.S. soldiers have been killed and around 140 have been wounded.

Reporting by Parisa Hafezi in Dubai, Alexander Cornwell in Tel Aviv and Reuters bureaux Writing by Peter Graff; Editing by Sharon Singleton and Alex Richardson

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Alexander Cornwell

Thomson Reuters

Alexander has over a decade of international reporting experience. He is currently a senior correspondent in Jerusalem covering Israel & the Palestinian Territories and was formerly in Dubai where he covered the Arabian Peninsula, including the United Arab Emirates, Saudi Arabia and Yemen, often writing about foreign policy, security and economic-related issues.

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