Iran threatens new offensive while US rules out extending ceasefire deal

Iran will shift to a "fully offensive" military ​posture because efforts to negotiate a permanent end to the war with the U.S. have stalled, a senior Iranian official told Reuters on Monday, as Washington ruled out extending ‌a temporary ceasefire agreement.

Outward progress towards peace talks and a resumption of oil tanker traffic through the strategic Strait of Hormuz has ground to a halt, threatening to extend the conflict that the US and Israel launched with attacks on Iran on February 28.

"Iranian entities must be prepared to escalate tensions in the Strait of Hormuz and wider region, as Iran will be ready to make decisions and take action on difficult decisions," the Iranian official said, adding that Tehran would conduct a "timely and precise" military ​attack to break the US naval blockade if diplomacy failed.

The Islamabad memorandum of understanding signed in June to end the war had given Iran and the US until Monday to reach a final ​peace agreement.

Signed on June 17, the memorandum set a 60-day time frame for a broader deal on Iran's nuclear programme and US sanctions.

Read: Iran threatens to go on offensive in Strait of Hormuz if diplomacy with US fails

The agreement, which declared ⁠the "immediate and permanent termination of military operations on all fronts," quickly unravelled over a dispute about control of the Strait of Hormuz, the narrow waterway through which a fifth of global oil and liquefied ​natural gas flowed before the war.

Asked by reporters on Monday if the US was seeking to extend June's interim agreement, US President Donald Trump said no.

Vessel struck by 'unknown projectile' in Strait of Hormuz: UKMTO

A vessel was struck by an unknown projectile while transiting outbound through the Strait of Hormuz, the UK Maritime Trade Operations (UKMTO) centre said early on Tuesday.

"The Company Security Officer has reported that the vessel was struck by an unknown projectile while conducting an outbound transit of the Strait of Hormuz. The impact caused damage to the engine room and resulted in a crew casualty," it said in a statement.

The remaining crew members are being assisted by the Omani Coast Guard, UKMTO said

No environmental impact has been reported, while authorities are investigating the incident, it added.

UKMTO advised vessels transiting the Strait of Hormuz to exercise caution and report any suspicious activity.

Back channel to IRGC

In one glimmer of diplomacy, media reports said ​Trump had opened back-channel discussions with the Islamic Revolutionary Guard Corps, which has become more powerful during the war and controls large parts of Iran's armed forces and the economy.

Axios, citing two sources with direct knowledge, reported that former Director of National Intelligence Tulsi Gabbard spoke with an Iraqi Kurdish leader with close ties to the IRGC, and that through this intermediary the US delivered a message to IRGC commander General Ahmad Vahidi. Fox News later reported that Trump confirmed ​the report in a telephone interview.

The Trump administration was concerned about whether Iranian negotiators across the table actually spoke for the IRGC, Axios said, at a time when Reuters was reporting that Vahidi had become a ​pivotal figure. Vahidi responded that he was aligned with the Iranian negotiators, Axios said.

"I can't go into the details of it, but I will say that the conversations between the U.S. government and different areas of the Iranian government at ‌all areas ⁠is probably more robust than it's maybe ever been," Jared Kushner, Trump's son-in-law and special envoy, said in a separate interview with Fox News Channel’s Chief Foreign Correspondent Trey Yingst on Monday.

Trump threatens to bomb Oman

Iran said point 5 of the Memorandum of Understanding gave it the right to manage the strait, which it shares with US ally Oman, while the US rejected that interpretation. Hostilities resumed as Iran began firing on vessels it said were trying to sail through Hormuz on an unapproved route, and Trump said on July 7 that the pact was "over."

The Iranian official told Reuters the US must meet the entirety of the MoU's provisions ​within a few weeks as a precondition for ​further negotiations.

Read more: Strait of Hormuz defenders will 'break your legs', Iran army chief to Trump

Even as Iran projects resilience in the ⁠war, its leaders are worried that a threat of more economic punishment could increase hardships, reignite unrest and further erode the Islamic Republic’s legitimacy, according to three Iranian officials.

Iran entered the war with high inflation, a weakening currency, energy shortages, sanctions and deep structural weaknesses, and must now contend with damaged infrastructure, disrupted trade, ​lost production and the cost of rebuilding.

Iran has separately been negotiating an agreement on managing the strait with Oman and says they are close ​to a deal.

Trump responded to ⁠those negotiations with a threat against the Gulf state, a longstanding US security partner.

"If Oman gets in the way, we'll bomb the shit out of them," Trump told Fox News.

Thousands of people have been killed in the conflict, mainly in Iran and Lebanon. Iran has bombed US military bases and infrastructure in countries including Oman, Jordan, Kuwait, Israel, the United Arab Emirates and Saudi Arabia.

Trump warned Americans in a speech at a rally on Friday ⁠to prepare for continued ​high fuel prices as a result of the war.

Benchmark Brent crude oil futures have surged during the conflict, hitting a ​peak of $126 a barrel, roughly 75% above pre-war levels. Brent crude settled more than $2 higher on Monday to $90.87 a barrel.

For Americans who will vote in November congressional elections, gasoline prices have risen above $4 per gallon, up from less than $3 before the war, according ​to the automotive group AAA.

Erdogan, Trump discuss bilateral ties, Iran and Gaza in phone call

Turkish President Recep Tayyip Erdogan held a phone call on Monday with US President Donald Trump, discussing bilateral relations as well as regional and global developments, said Turkiye’s Communications Directorate.

According to the statement, Erdogan told Trump that making maximum use of diplomacy amid tensions between Iran and the US is “important,” expressing hope that negotiations will continue and saying that Türkiye will keep supporting peace efforts.

The Turkish president said the Mecca Joint Defense Agreement signed earlier this month between Türkiye, Pakistan and Saudi Arabia “demonstrates a strong stance in ensuring regional stability and security,” the statement said.

On Gaza, Erdogan said that at a time when the goal is to move to the second phase of the peace process, there has been an increase in actions by the Israeli government targeting Palestinians, it added.

He added that “Türkiye will continue to support lasting peace in the region and steps to be taken for the reconstruction of Gaza,” according to the statement.

Iranian foreign minister says ‘nothing justifies’ attack on Iraqi Kurdish premier’s office

Iranian Foreign Minister Abbas Araghchi said on Monday that “nothing justifies” the drone attack targeting the office of Masrour Barzani, premier of the Iraqi Kurdish Regional Government (KRG).

“Nothing justifies the reckless attack on PM Barzani’s office,” Araghchi said in a statement on US social media company X.

“Kurdish friends should be vigilant against false-flag ploys to sow discord between neighbours,” he added.

Araghchi said Iran had protected its “Kurdish friends against Saddam (Hussein) and DAESH,” using an alternate name for the terrorist group ISIS and referring to the late Iraqi leader, adding that Tehran is “thankful for the security they’ve provided on our border.”

Earlier, Foreign Ministry spokesman Esmail Baghaei said the attack was “a highly suspicious development that must be approached with vigilance and scrutiny,” according to Iran’s official IRNA news agency.

Baghaei reaffirmed Tehran’s commitment to maintaining and strengthening friendly relations with Iraq and the Kurdish Regional Government in all areas of mutual interest.

He urged all sides to thwart what he called the “sinister plots of the enemies of Iran and Iraq” aimed at damaging the “fraternal relations between the two nations.”

Baghaei also cited previous warnings by Iraqi officials, including the country’s national security adviser, about the discovery of cells linked to foreign parties that were involved in planning and carrying out “false flag” operations.