Hopes for a swift end to the Middle East war faded on Thursday after U.S. President Donald Trump vowed more aggressive strikes on Iran, in an eagerly anticipated address that disappointed investors hoping for clearer signals of a way out.
Stocks slid and oil prices surged after Trump said military operations would be intensified in the next two to three weeks, offering no concrete timeline for ending a conflict that sparked global energy supply chaos and has threatened to send the world economy into a tailspin.
"I can say tonight that we are on track to complete all of America's military objectives shortly, very shortly," Trump said in a Wednesday evening prime-time speech.
"We're going to hit them extremely hard over the next two to three weeks. We're going to bring them back to the Stone Ages where they belong."
Trump also suggested the war could escalate if Iranian leaders did not give in to U.S. terms during negotiations, with strikes on Iran's energy and oil infrastructure possible.
No reassurance on energy crisis
Benchmark Brent crude prices LCOc1jumped about 5% to $106.16 per barrel, with little reassurance from Trump's address about how the critical Strait of Hormuz energy conduit would reopen. Prices had fallen earlier on Thursday after settling lower in the previous session.
Stocks took a hit, with U.S. index futures EScv1 down 1% and European futures STXEc1 sinking over 1.5%. Almost all Asian bourses were in the red, with Japan's Nikkei .N225 down 1.8% and MSCI's index of other Asia-Pacific shares .MIAPJ0000PUS down more than 1.5%.
"If he (Trump) was trying to inspire confidence in the markets, he has not done that. The key question in all investors' minds is 'When is this going to be over?', that is what is creating the volatility," said Russel Chesler, Head of Investments and Capital Markets at Vaneck Australia.
Shortly after Trump's speech, the Israeli military said it had identified missiles launched from Iran toward Israeli territory.
Thousands of people have been killed across the Middle East since February 28, when the U.S. and Israel struck Iran, triggering Iranian attacks on Israel, U.S. bases and the Gulf states, while opening a new front in Lebanon.
Iran also all but closed the Strait of Hormuz, a vital waterway carrying about a fifth of global oil and liquefied natural gas, pushing up energy costs and weighing on Trump's sagging approval ratings months ahead of pivotal midterm congressional elections.
But Trump in his speech said the U.S. did not need the strait and he challenged allies who rely on oil in the region to work towards reopening it.
"Many Americans have been concerned to see the recent rise in gasoline prices here at home," Trump said. "This short-term increase has been entirely the result of the Iranian regime launching deranged terror attacks against commercial oil tankers of neighbouring countries that have nothing to do with the conflict."
The International Monetary Fund, World Bank and International Energy Agency on Wednesday warned the war was having "substantial, global and highly asymmetric" effects and said they would coordinate their response, including through potential financial support to those countries hit hardest.
Prospects elusive for near-term resolution
In an interview with Reuters earlier on Wednesday, Trump said U.S.-Israeli strikes had ensured Iran would not obtain nuclear weapons, adding that U.S. forces could return with "spot hits" if the threat resurfaces.
"They were right at the doorstep (of a nuclear weapon)," Trump said in his TV address, without providing evidence, touting what he said were "swift, decisive, overwhelming victories on the battlefield".
"We are systematically dismantling the regime's ability to threaten America or project power outside of their borders."
Prior to Trump's remarks, Iranian President Masoud Pezeshkian said in a letter addressed to the American people that his country harbours no enmity towards ordinary Americans.
Trump said discussions were ongoing with Iranian leaders he considered less radical than previous leaders. On social media earlier Wednesday, he said Iran had requested a ceasefire but that would not be considered until its Strait of Hormuz blockade ends. Iran denied making any such request.
A senior Iranian source told Reuters on Wednesday that Tehran is demanding a guaranteed ceasefire to halt its attacks and said no talks have taken place through intermediaries on a temporary truce.
'Go to the Strait and just take it'
Two security sources from Pakistan, which is mediating in the conflict, told Reuters that Islamabad had proposed a temporary ceasefire but had not heard back from either side.
U.S. Vice President JD Vance communicated with intermediaries from Pakistan about the Iran conflict as recently as Tuesday, according to a source briefed on the matter, making clear Trump was open to a ceasefire if certain demands were met.
Trump had suggested on Tuesday he could wind down the war soon without a deal, while scaling up threats to withdraw from NATO. He told Reuters he planned to express his disgust at NATO for what he considers its lack of support for U.S. objectives in Iran.
Trump did not explicitly mention NATO in his address but urged countries in need of oil to buy it from the United States or to "build up some delayed courage".
"Go to the Strait and just take it," Trump said. "Iran has been essentially decimated. The hard part is done, so it should be easy."
European states have sought to appear unruffled, and France's junior army minister Alice Rufo said operations by NATO in the Strait of Hormuz would be a breach of international law.
