Israel said the war against Iran was entering its "decisive phase" on Saturday, as explosions rocked cities across the Middle East, with strikes on the US embassy in Baghdad and a major Emirati energy facility.

Washington's embassy in Iraq was hit by a drone, security sources told AFP, the second time it has been targeted since February 28, when the United States and Israel attacked Iran and plunged the Gulf into a conflict that has sent shockwaves through the global economy. 

Millions have been displaced by waves of drone, missile and aerial bombing, while more than 1,200 people have reportedly been killed in Iran, with little sign of the conflict slowing as it entered its third week.

Oil prices have surged by 40 percent as Iran chokes off the vital Strait of Hormuz with threats to shipping and strikes on Gulf energy facilities. 

Clouds of black smoke rose Saturday over Fujairah, home to a major Emirati oil storage and export terminal, shortly after Iran's military warned UAE civilians to avoid port areas.  

President Donald Trump said Friday that US forces had struck Iran's Kharg Island, its biggest oil export hub, and "obliterated every MILITARY target", though sparing its energy facilities. 

Iranian media confirmed the island's oil facilities were unaffected. Iran had threatened US-linked oil and energy firms would be "turned into a pile of ashes" if they were hit.

The strike could be a "turning point" with both sides escalating in a bid to force a surrender, said analyst Vali Nasr of John Hopkins University in a social media post. "The end will likely not be Iranian backing off but inflaming the Gulf."

Trump said the US Navy would start escorting tankers through the Strait of Hormuz "very soon", but governments around the world fear a prolonged blow to their economies.

'Long as necessary'

Israel's Defence Minister Israel Katz said the strikes on Kharg showed the war was entering a "decisive phase", though he cautioned it would "continue as long as necessary".

Yet, despite facing superior US and Israeli firepower, Iran appears determined to fight on. 

Blasts were heard by AFP journalists over Jerusalem on Saturday after the army detected missiles fired from Iran.

Iran has launched missile and drone attacks against at least 10 of its neighbours.

The Palestinian Islamist movement Hamas urged Iran to refrain from targeting Gulf neighbours, many of which have supported its cause. It was a rare breach between the allies, though Hamas affirmed Tehran's right to defend itself.

Qatar said it intercepted two missiles over the capital's downtown area on Saturday and evacuated key areas after blasts were heard by AFP journalists in Doha.

Strikes continue in Iran, with heavy blasts shaking Tehran late Friday and local media reporting strikes in several provinces through Saturday. 

Israel's army warned people in an industrial zone of Tabriz in northern Iran to evacuate, signalling an imminent attack. 

Iran's health ministry says more than 1,200 people have been killed by US and Israeli attacks, numbers that could not be independently verified.

Up to 3.2 million people have been displaced inside Iran, according to the UN refugee agency.

Trump described Iran as "totally defeated" and in search of a deal he was unwilling to consider.

More than 15,000 targets in Iran have been hit by the US and Israel in two weeks, the Pentagon said. 

A report this week said the first six days alone cost the US $11.3 billion and it has lost 13 military personnel. 

Transition

US media raised the possibility of a ground invasion, with the New York Times and Wall Street Journal reporting the Pentagon had dispatched the Japan-based amphibious assault ship USS Tripoli to the region with some 2,500 Marines.

Iran's rulers appear intent on showing they will survive the war and maintain control, despite their supreme leader Ali Khamenei being killed on day one.

Khamenei's son Mojtaba Khamenei was named the new supreme leader, but has been absent from public view and is reportedly wounded.

Reza Pahlavi, the US-based son of Iran's last shah, said on social media Saturday that he was ready to lead a transition "as soon as the Islamic Republic falls".

But Iran's Revolutionary Guards have threatened a heavy crackdown on any anti-government protests. Thousands were killed in mass demonstrations in January, and a near-total internet blackout has been imposed since the war began.

'Existential battle'

Beyond the Gulf, Turkey said NATO forces shot down a ballistic missile launched from Iran -- the third such interception in the war.

Lebanon has also been drawn in. 

The Iran-backed Hezbollah attacked Israel from Lebanon after Khamenei's death and its leader, Naim Qassem, has called the current conflict an "existential battle".

Israel has responded with air and ground assaults, killing at least 773 people according to the Lebanese authorities, and issuing evacuation orders that have displaced hundreds of thousands. 

An overnight strike in southern Lebanon killed a dozen health workers at a clinic, with health authorities saying Israel has killed 26 paramedics since March 2.