Iran Shifts to Offensive Strategy in Strait of Hormuz Amid US Diplomacy Collapse

DUBAI/WASHINGTON, Aug 17 (Reuters) – Iran has decided to shift its policy from defensive to "fully offensive" due to the deadlock in efforts to agree a permanent end to its war with the United States, a senior Iranian official told Reuters on Monday.

Progress towards peace talks and a resumption of oil tanker traffic through the strategic Strait of Hormuz has ground to a halt, with no sign that the warring parties are moving towards ending the conflict that the U.S. and Israel launched 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 U.S. naval blockade if diplomacy failed.

There was no immediate response to those comments from Washington, but U.S. President Donald Trump said in a phone interview with Fox News on Monday that Iran "should put up the white flag of surrender."

Throughout the conflict, Trump has alternated between threats of escalation and assertions that a peace deal is imminent.

Monday marked the day by which Iran and the United States were expected to reach a final deal under a memorandum of understanding agreed in June and aimed at ending the war.

Signed on June 17, the MoU set out a 60-day timeframe, extendable by mutual consent, by which Washington and Tehran should reach a broader agreement on issues including limiting Tehran's nuclear program and lifting U.S. sanctions.

That interim deal, which declared the "immediate and permanent termination of military operations on all fronts," quickly unraveled, however, due to a dispute over control of the Strait of Hormuz, the narrow waterway through which a fifth of global oil and liquefied natural gas flowed before the war.

Tehran said point 5 of the MoU gave it the right to manage the strait, which it shares with Oman, while Washington rejected that interpretation. Hostilities resumed as Tehran began firing on vessels it said were trying to sail through the waterway on an unapproved route.

Trump said on July 7 that the pact was "over." Tehran has repeatedly accused Washington of consistently violating its commitments.

"Within the short period of a few weeks set by Iran, all the agreement's provisions must be implemented by the U.S. This is a precondition for further negotiations with the U.S.," the Iranian official told Reuters, adding that mediators would share Tehran's deadline with Washington and regional states.

Tehran has separately been negotiating an agreement with Oman over management of the strait, seen as a key component of a wider deal, and says they are close to agreement, although progress has been slow.

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

There was no immediate comment from Oman.

Thousands of people have been killed in the conflict, mainly in Iran and Lebanon, since the U.S. and Israel launched attacks on Iran at the end of February. Iran has struck U.S. assets and infrastructure in countries including Oman, Jordan, Kuwait, Israel, the United Arab Emirates and Saudi Arabia.

Both Iran and the United States have stepped up rhetoric over the past week.

Trump warned Americans in a speech at a rally on Friday to prepare for continued high fuel prices as a result of the war, while also saying that "after we finish defeating Iran … pretty soon I'll be declaring the Hormuz Strait a territory of the United States."

Earlier on Monday, Trump posted on his Truth Social platform: "The number one Goal is, and always will be, that Iran cannot have, in any way, shape, or form, a Nuclear Weapon," repeating one of his stated rationales for the war.

Benchmark Brent crude oil futures LCOc1 have surged since the start of the war in February, hitting a peak of $126 a barrel, roughly 75% above pre-war levels, with choppy trade reflecting concerns over disruptions to Gulf oil supplies and shifting signals on peace talks.

Brent crude rose slightly on Monday, to around $89 a barrel.

Attacks by Iran-backed Houthis in Yemen have also renewed concerns about a widening regional war and the economic fallout it could bring.

In the latest incident, the Houthis attacked what they called a Saudi military ship and four escort vessels in the Bab el-Mandeb Strait with missiles, according to the group's military spokesperson Yahya Saree on Telegram on Monday. The strait is a strategic chokepoint connecting the Red Sea with the Gulf of Aden and an important international shipping route.

There was no immediate confirmation from Saudi authorities.

(Reporting by Parisa Hafezi and Katharine Jackson; Writing by Alex Richardson; Editing by Hugh Lawson)

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