The risk of further escalation, including a potential US ground operation to seize Kharg Island, is sending tremors through financial markets, as well as neighboring Gulf countries.

In a post on his Truth Social network, Trump expressed confidence that a negotiated settlement would soon be reached, adding that the United States was in "serious discussions" with "a more reasonable regime" in Tehran.

But he warned that if a deal was not struck -- including to reopen the Strait of Hormuz shipping lane -- US forces would destroy "all of their Electric Generating Plants, Oil Wells and Kharg Island (and possibly all desalinization plants!)."

Destroying civilian infrastructure such as power and water facilities would be illegal under international humanitarian law and could constitute a war crime, experts say.

Iran has previously threatened to retaliate by targeting energy infrastructure and desalination plants in its Arab neighbors in the Gulf who host US military bases, such as the United Arab Emirates, Oman, Qatar and Saudi Arabia.

Market experts warned that any US ground operation or wider Iranian retaliation could send oil prices to levels not seen since the July 2008 commodity boom, when the cost of world benchmark Brent crude hit close to $150 per barrel.

Brent has already risen in price by nearly 60 percent this month, and the US benchmark WTI by more than half.

The spectre of a widening conflict grew over the weekend when Iran-backed Houthi rebels in Yemen fired missiles and drones at Israel.

The Houthis have previously threatened shipping through the Red Sea and Suez canal, which requires vessels to travel through a narrow strait off Yemen's coast.

"The Houthi's ability to disrupt shipping through the Bab al-Mandeb strait, which accounts for roughly 12 percent of global trade, is the new key risk," said analyst Chris Weston at Australian financial services company Pepperstone.

In Lebanon, Israel continued to bombard Beirut's southern suburbs and the country's south, where an airstrike targeted an army checkpoint and killed a soldier.

The United Nations peacekeeping force in south Lebanon, where Israeli and Hezbollah forces are clashing, reported that two of its personnel were killed on Monday in "an explosion of unknown origin".

Another peacekeeper was killed on Sunday, with Indonesia confirming one of its soldiers had died.

- Diplomatic efforts -

Around the Middle East on Monday, there was no let-up in hostilities.

Israel said its air defence batteries responded to "missiles launched from Iran," after earlier announcing it was striking "terror regime military infrastructure across Tehran."

Israel also confirmed it had hit the Imam Hossein University in the capital, which it said was used by Iran's Islamic Revolutionary Guards Corps (IRGC) for advanced weapons research.

In Israel, emergency services reported a fire at an oil refinery in the northern port city of Haifa, which also suffered a blaze on March 19.

Kuwait condemned strikes on a power station and a desalination plant, which killed an Indian worker.

On the diplomatic front, Egyptian President Abdel Fattah al-Sisi, whose country is playing a role in mediating indirect talks between the US and Iran, appealed directly to Trump on Monday to find an offramp.

"Please, help us to stop the war, you are capable of it," Sisi told a press conference with Cypriot President Nikos Christodoulides in Cairo.

Egypt's foreign minister joined counterparts from Saudi Arabia, Turkey and Egypt in the Pakistani capital Islamabad on Sunday for talks on the crisis.

"As the war that the US and Israel launched against Iran enters its second month, it appears to be stalemated," Ali Vaez, an Iran expert at the International Crisis Group think-tank, told an online event on Monday.

Trump has consistently claimed to be in direct contact with senior Iranian figures who have not been identified publicly.

US Secretary of State Marco Rubio referred to internal "fractures" within the Islamic republic on Monday, while expressing hope that the Iranian officials allegedly in contact with Washington had the "power to deliver."

Iranian leaders continue to insist Trump's offer of talks is a smokescreen as he moves thousands of marines and paratroopers to the region for a possible ground invasion.

- Semblance of routine -

After weeks of strikes, residents of Tehran painted a picture of a city that is still clinging to some routine, with cafes and restaurants open and no shortages reported in supermarkets or petrol stations.

Security remains tight, with checkpoints erected on streets around the capital.

"When I make it to a cafe table, even for a few minutes, I can almost believe the world hasn't ended," said Fatemeh, 27, a dental assistant.

"And then I go back home, back to the reality of living through war, with all its darkness and weight."

Meeting in Paris on Monday, economy ministers and central bankers from the G7 club of rich countries discussed how to shield their citizens from the war's effects.

Many countries around the world have started to introduce energy-saving measures or are cutting fuel taxes to help consumers.

Developed countries agreed on March 11 to their biggest-ever release of oil reserves, with more releases predicted by analysts, especially if the war escalates.

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