Donald Trump demands Iran pay compensation as Strait of Hormuz deal hopes fade and oil prices surge

US President Donald Trump has escalated his war of words with Iran by demanding Tehran compensate victims of conflicts, attacks and protests he blamed on the Islamic Republic, as expectations of a quick agreement to reopen the Strait of Hormuz dimmed.

The fresh demand came after Iran called on the US to satisfy a series of conditions before the crucial shipping route could reopen, including compensation for damage inflicted since the US and Israel began striking Iranian territory more than five months ago.

“I am likewise demanding compensation from Iran, for all of the people that they have killed and gravely wounded with their roadside bombs and many conflicts, for which they are famous,” Mr Trump wrote on his Truth Social.

Oil markets reacted to the latest escalation after prices had already climbed on Iran’s earlier remarks. Brent crude extended its gains following Mr Trump’s post, rising 4.25 per cent at 3.20am AEST Tuesday.

The compensation demand marks a new element in Washington’s position, having not previously featured publicly in US negotiations or statements on Iran.

Mr Trump said the issue would now form part of any future negotiations with Tehran and argued payments should also be made to the families of hundreds of thousands of protesters he claimed had been killed by Iranian authorities.

Human rights organisations have accused the Iranian government of continuing its crackdown on opponents throughout the conflict.

The US President also called on Tehran to compensate “families of those killed on the USS Cole”, referring to the deadly October 12, 2000 attack on the American naval vessel in Yemen that killed 17 US sailors. The attack has been attributed to al Qaeda rather than Iran.

“Also, with respect to the Iran negotiations, Iran should be responsible for the damages and death caused to the people of Lebanon, Syria, Yemen, and Gaza!” Mr Trump wrote in a second post.

The intervention came after Iran indicated it was approaching a final agreement with Oman to establish new shipping lanes through the Strait of Hormuz, while maintaining Washington would first need to meet several demands.

Those conditions include compensation, the removal of sanctions and an end to military threats before Tehran agrees to reopen the strategically vital waterway.

Before the conflict, roughly one-fifth of the world’s oil and liquefied natural gas supplies travelled through the strait. The route has effectively remained blocked since US-Israeli strikes against Iran began on February 28, contributing to higher global oil prices and inflationary pressures.

Mr Trump has maintained the military campaign was necessary to prevent Iran from obtaining nuclear weapons and weaken its capacity to threaten other countries in the region.

But the President is also facing pressure to bring an end to a conflict that has proved deeply unpopular domestically ahead of November’s midterm elections.

The competing demands for compensation from Washington and Tehran mark another dramatic turn in months of volatile rhetoric surrounding the conflict.

Mr Trump has repeatedly alternated between warning of further military action against Iran and suggesting major diplomatic breakthroughs were close, only for neither outcome to materialise.

Earlier on Monday, Iranian Foreign Ministry spokesman Esmaeil Baghaei said negotiations with Oman over navigation arrangements in the Strait of Hormuz were “progressing smoothly and constructively,” with the two sides agreeing on a map for shipping routes.

However, several technical matters surrounding a proposed joint statement were still outstanding.

Speaking at a weekly press conference in Tehran, Baghaei said negotiations had also addressed arrangements for safe navigation, environmental safeguards, maritime services and efforts to combat crime.

He also indicated providing such services would ordinarily involve receiving payment.

US officials have repeatedly rejected any arrangement that would allow Tehran to control passage through the Strait of Hormuz or impose fees on vessels travelling through the strategic waterway.

Despite months of American military action, including a two-week bombing campaign in July, Washington has so far failed to break Iran’s hold over the strait.

The US and Iran reached a ceasefire in June, but Washington reinstated its blockade on Iranian shipping in the Gulf the following month.

Tehran accused the US of breaching the truce with the move, although the ceasefire had already deteriorated by that stage.

Iran has continued retaliatory attacks using missiles and drones against US allies throughout the region while also targeting commercial vessels attempting to transit the Strait of Hormuz without Tehran’s approval.