Trump lifts Iran threat after 'very good' talks on ending war

A tugboat escorts the world's largest aircraft carrier as it arrives at Souda Bay naval base.[Costas Metaxakis, AFP]

President Donald Trump said Monday the United States and Iran had held "very good" talks towards ending the three-week Middle East war, putting threatened US attacks on Iran's power plants on hold in a stunning about-turn.

In a social media post that immediately sent oil prices tumbling, Trump said Washington and Tehran had held "productive conversations" over the last two days towards "a complete and total resolution" of hostilities in the Middle East.

Based on the talks, Trump said he had instructed the Pentagon to "postpone any military strikes against Iranian power plants and energy infrastructure for a five-day period, subject to the success of the ongoing meetings."

The previously unreported US-Iranian talks would "continue throughout the week," Trump said.

The bombshell announcement came ahead of a Monday night ultimatum for the Islamic Republic to reopen the Strait of Hormuz shipping lane -- or see Trump "obliterate" its power plants.

In response, Iran had threatened to deploy naval mines in the Gulf and target power plants across the region -- ramping up its rhetoric after warnings the world faced an energy crisis of historic proportions if the US-Israeli war with Iran drags on.

Tehran has retaliated against US-Israeli assaults by throttling traffic through Hormuz, a conduit for a fifth of global crude, hitting energy sites and US embassies across the Gulf as well as targets in Israel.

Israel hit Tehran with fresh strikes early Monday, with AFP witnessing a thick plume of black smoke billowing in the city's east.

Later in the day, another series of blasts was heard in the Iranian capital, though it was not immediately clear what had been hit.

The head of the International Energy Agency warned overnight that, in the event of a protracted war, daily oil losses put the world on track for a crisis worse than the combined impact of both 1970s oil shocks and Russia's invasion of Ukraine.

Oil prices have been driven above $100 a barrel by the conflict -- and tumbled sharply after Trump's Monday announcement.