US President Donald Trump threatened further strikes against Iran on Monday after the first exchange of direct attacks in a month, raising tensions in a conflict that had recently shifted into an economic standoff.

Iran launched missiles overnight at two US air bases in Jordan in response to a US attack on Iran’s Larak Island, where Washington said it had struck Iranian launchers firing mines into the Strait of Hormuz.

The exchange highlighted how quickly a conflict that has increasingly been fought through sanctions, blockades and economic pressure can still spill back into military action. While neither side appeared to be seeking a return to full-scale war, both signalled they were prepared to respond to further attacks.

“We’re going to hit them hard,” a Fox News reporter quoted Trump as later telling the channel. “There will be a response.”

Separately, Trump told reporters in the Oval Office that the renewed strikes did not signal a return to full-scale war, describing Iran as a “failed nation” whose economy and military had been severely degraded. “That doesn’t mean we won’t smack them. We’ll see what happens.”

Asked whether he had ruled out ⁠using nuclear weapons against Iran, Trump said there was “no reason” to do so because Iran was already “totally defeated militarily.”

A senior Iranian source told Reuters the overnight exchanges of fire, the first since late July, were a “limited and contained confrontation” but said Tehran would deliver a harsh response if attacked again.

Trump said US air defences had downed all Iranian missiles that could have caused any damage and that new US economic sanctions on Iran were having a big impact, Fox News reported.

Earlier, Trump had posted to social media two videos depicting explosions engulfing Iran’s main oil export terminal, with the message “Kharg island being blown to smithereens!!!”

But the videos were generated by AI and no such attack took place. Iran called Trump’s post “laughable”. Vice President JD Vance told reporters Trump “likes to switch it up on social media a little bit” and was “sending a message”.

“They’re in shock at the state of their economy,” Bessent told reporters at a meeting of G20 finance ministers and central bank governors in North Carolina. “I would think that they are lashing out kinetically because they are losing economically.”

Bessent told Reuters on Sunday ⁠that new secondary sanctions were likely to be unveiled weekly in the effort to pressure Iran, with an initial focus on banks.

US hit Iranian island in Strait of Hormuz

US forces struck two Iranian launchers on Iran’s Larak Island on Sunday, a US official said, after “Islamic Revolutionary Guard Corps forces were observed preparing to launch rockets with sea mines into the Strait of Hormuz”.

Three people were killed in the US attack, Iran’s Tasnim news agency reported. The state-affiliated Nournews said two of them had been identified as members of the Revolutionary Guards Navy.

Larak is a small island in the strait near the strategic Iranian port of Bandar Abbas. The Strait of Hormuz, which normally handles a fifth of global crude oil and gas shipments, has been effectively blocked since the start of the war.

In a statement, the US Central Command said ⁠it had taken “limited, precise” action against minelaying forces of Iran’s Revolutionary Guards that posed an “imminent threat” in the strait. It gave no details.

Iranian state TV quoted the Revolutionary Guards as saying a supertanker had caught fire and been brought to a halt after being struck by two naval mines in the south of the strait. The US military later denied the claim.

President says Iran still wants negotiated end to conflict

Trump halted his “Operation Epic Fury” bombing campaign with a ceasefire in April, and the sides agreed in June on an interim framework for talks. But ⁠that failed to hold, leading to repeated exchanges of fire including two weeks of US bombing in July.

Over the past month, Washington has hoped a blockade of Iranian ports will inflict enough economic damage to force Iran to comply with US demands. Tehran meanwhile has maintained that the Strait of Hormuz is shut and will reopen only under its supervision.

Iranian President Masoud Pezeshkian nevertheless said on Monday that Tehran still favoured a negotiated settlement.

“... we believe that continuing the war is in no one’s interest, ⁠neither ours, nor the region’s, nor humanity’s,” Iran’s semi-official Tasnim news agency quoted him as telling Indian Prime Minister Narendra Modi on the sidelines of a regional security meeting in Kyrgyzstan.

Trump has yet to achieve the objectives he set out at the start of the war: dismantling Iran’s nuclear programme, curbing its ability to attack regional rivals and creating conditions for Iranians to overthrow their clerical rulers.