US President Donald Trump threatened Monday to destroy Iran's crude export hub of Kharg Island, along with its oil wells and power plants, unless Tehran quickly accepted a peace deal, compounding fears that have already sent energy prices soaring. 

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 crude Brent 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.

"If the US were to launch a ground invasion of Iran, possibly taking the Kharg Island, or if Tehran were to intensify retaliatory strikes on energy infrastructure or fully close the Strait, projections of $200 (a barrel) oil will not be an otherworldly supposition anymore," analyst Tamas Varga of PVM Energy said.

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. 

The United States has been sending more military assets into the region, including an amphibious assault ship carrying 3,500 Marines, leading Iranian officials to call the diplomatic efforts a smokescreen for further intervention. 

Diplomatic efforts

On the ground 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's fire and rescue services reported a fire at an oil refinery in the northern port city of Haifa, which also suffered a blaze on March 19.

Kuwait reported strikes on a power station and a desalination plant.

Israel confirmed that in recent days it had hit the Imam Hossein University in Tehran, which it says is used by Iran's Islamic Revolutionary Guards Corps (IRGC) for advanced weapons research. 

In keeping with its tit-for-tat targeting, Tehran has warned it could strike US universities across the Middle East.

On the diplomatic front, Pakistan -- acting as a go-between for Washington and Tehran -- hosted foreign ministers from Saudi Arabia, Turkey and Egypt in Islamabad on Sunday for talks on the crisis.

Pakistan's Foreign Minister Ishaq Dar said they had discussed how to "bring an early and permanent end to the war."

He said Iran and the United States had expressed "confidence in Pakistan to facilitate the talks" and that he had spoken to his Chinese counterpart Wang Yi as well as UN Secretary-General Antonio Guterres and other foreign ministers who also backed the idea.

Economy ministers and central bankers from the G7 club of rich countries met in Paris where they pledged to use "all necessary measures" to stabilise the energy markets.

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.

Semblance of routine

The weeks of strikes have also taken a heavy toll on ordinary people in Iran.

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.

"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."

In southern Lebanon, Israel is continuing to expand its military operations, with Prime Minister Benjamin Netanyahu ordering the military at the weekend to "further expand" a so-called "security zone."

There was fresh bombardment of Beirut's southern suburbs on Monday as well as airstrikes in the country's south, one of which targeted an army checkpoint and killed a soldier.

Indonesia confirmed on Monday that one of its UN peacekeepers had been killed in Lebanon.

Separately, the Israeli military said one of its soldiers was killed on Sunday in combat in southern Lebanon, bringing to six the number of troops killed since fighting with Iran-backed Hezbollah began this month.