WRAPUP 4-Iran renews attacks on US Gulf allies, Trump says that was not expected

By Alexander Cornwell and Jonathan Landay

TEL AVIV/WASHINGTON, March 17 (Reuters) - Iran launched fresh attacks on the United Arab Emirates on Tuesday, the kind of strikes on U.S. Gulf allies that President Donald Trump said had not been expected, but which sources said he had been warned about before the conflict.

The U.S.-Israeli war on Iran is in its third week with at least 2,000 people dead and no end in sight. The Strait of Hormuz remains largely closed off, with U.S. allies rebuffing Trump's request for help to reopen the critical waterway, raising energy prices and fears of inflation.

There was no let-up in attacks by both sides early on Tuesday, with Iran launching missiles on Israel overnight, underscoring that Tehran still retains the capacity to carry out long-range strikes despite more than two weeks of pounding by U.S. and Israeli weapons.

The Israeli military said it was targeting "Iranian regime infrastructure" with a new wave of strikes across Tehran, as well as Hezbollah sites in Beirut, a day after saying it had drawn up detailed plans for at least three more weeks of war with Iran.

Rockets and at least five drones targeted the U.S. embassy in Baghdad early on Tuesday, Iraqi security sources said, describing it as the most intense assault since the war began. Two U.S. officials said no injuries were reported so far.

'NOBODY EXPECTED THAT. WE WERE SHOCKED'

Iran also targeted the United Arab Emirates, where attacks forced the temporary closure of airspace and a drone hit an oil facility in Fujairah, a key port for Emirati oil exports, for a second consecutive day.

UAE authorities said debris from an intercepted ballistic missile fell in Abu Dhabi’s Bani Yas area, killing one Pakistani national, while a fire caused by a drone attack was being fought at Abu Dhabi's Shah gas field.

Trump said Iran’s strikes against its neighbours including Qatar, Saudi Arabia, the United Arab Emirates, Bahrain and Kuwait were a surprise.

"They (Iran) weren’t supposed to go after all these other countries in the Middle East," he said on Monday. "Nobody expected that. We were shocked."

However, Trump was warned that attacking Iran could trigger strikes against U.S. Gulf allies, according to a U.S. official and two sources familiar with U.S. intelligence reports.

The U.S. official, who like the other two requested anonymity to discuss the issue, said Trump was briefed before the war that striking Iran could trigger a broader regional conflict that would include Iranian attacks against Gulf capitals, especially if Tehran saw those countries condoning or actively supporting the U.S. bombardment.

Trump was also briefed ahead of the operation that Tehran would likely seek to close the economically vital Strait of Hormuz, according to two other sources familiar with the matter.

NO COALITION TO HELP OPEN HORMUZ YET

Trump earlier accused some Western allies of ingratitude after several countries rebuffed his demand to send warships to escort oil tankers in the strait, through which 20% of the world's oil and liquefied natural gas flow.

Speaking at a White House event in Washington, Trump said many countries had told him they were prepared to help, but voiced frustration with some long‑standing allies.

"Some are very enthusiastic about it, and some aren't," he said, without offering specifics. "Some are countries that we've helped for many, many years. We've protected them from horrible outside sources, and they weren't that enthusiastic. And the level of enthusiasm matters to me."

A number of U.S. partners, including Germany, Spain, Italy, Japan and Australia said they had no immediate plans to send ships to help reopen the strategic waterway, which Iran has effectively shut with drones and naval mines.

"We lack the mandate from the United Nations, the European Union or NATO required under the Basic Law," German Chancellor Friedrich Merz said in Berlin, adding that Washington and Israel had not consulted Germany before launching the war.

Naval escorts will not "100 percent guarantee" the safety of ships attempting to transit the waterway, the Financial Times quoted the head of the International Maritime Organization as saying on Tuesday.

Trump had earlier suggested China, which relies on Iranian crude, should help open the strait and that he might delay a much anticipated trip to Beijing at the end of the month if he did not get support. On Monday, Trump said he was seeking to delay the visit by "a month or so".

While the U.S. and Israel say they have decimated Iran's military, Tehran's fleet of cheapdrones is continuing to cause havoc in the region.

Iran's parliament speaker Mohammad Baqer Qalibaf dismissed foreign reports Iran is running low on missile launchers.

“They say that our firepower has decreased, but our offensive power, experience, and accuracy have increased," he said on state TV on Tuesday, adding that regional security needed to be established by regional countries.

OIL PRICES RISE, PUTTING PRESSURE ON INFLATION

Oil prices rose more than 5% on Tuesday, reversing some of the previous session's losses, on worries about supplies, while Asian shares also rallied after Monday's sell-off.

Investors and policymakers are grappling with the risk that higher oil prices fuel inflation while crimping global growth, a dire scenario known as "stagflation".

The board of the Reserve Bank of Australia, in a close decision, raised its cash rate for a second straight month on Tuesday, saying higher borrowing costs were needed to contain prices.

"The Board is clearly worried that recent geopolitical developments could take a bad situation and make it much worse," said Abhijit Surya, senior economist at Capital Economics.