US President Donald Trump says a key agreement with Iran is effectively “over” following escalating military tensions across the Middle East.

Speaking at a NATO summit in Turkey, Mr Trump said continuing diplomatic efforts with Tehran was “a waste of time”, signalling the strongest indication yet that the Memorandum of Understanding between the two countries has collapsed.

His comments come after Iran’s Islamic Revolutionary Guard Corps claimed responsibility for strikes on US military targets in Bahrain and Kuwait, describing them as retaliation for earlier American strikes on Iranian sites.

Mr Trump sharply criticised Iran’s actions, accusing the country of violating a ceasefire by targeting commercial vessels in the Strait of Hormuz.

“They’re dirty players,” he said.

The US President also used inflammatory language to describe Iran, calling its leadership “evil” and insisting Washington should shift its focus away from negotiations.

“We have to rid their cancer,” Mr Trump said. “You’ve got to cut out cancer early. And that’s the way I feel.”

“I don’t want to deal with them any more; they’re scum.”

Mr Trump’s remarks suggest the administration is moving further away from diplomacy as tensions in the region continue to rise.

Oil prices spiked by 6 per cent following Mr Trump’s remarks.

CNBC reports that West Texas Intermediate futures for August delivery rose 6.25 per cent to $US74.83 ($107.85) per barrel. Futures for International benchmark Brent crude for September delivery jumped 6 per cent to $US78.64 per barrel.

Signalling that things have taken a turn for the worse, the US Treasury Department on Tuesday withdrew a waiver that had allowed Iran to sell its oil.

Negotiations to reach a final ceasefire deal had been due to start after the dayslong funeral for Iran’s Supreme Leader Ayatollah Ali Khamenei, who was killed February 28 in the war’s first moments. The funeral, which ends Thursday, was supposed to be a period of lower tensions.

The talks were meant to focus on the toughest matters, including fully reopening the strait and rolling back Tehran’s disputed nuclear program.

“The era of bullying and extortion is over,” Iran’s Parliament Speaker Mohammad Bagher Qalibaf wrote on X. “It leads nowhere. We don’t fold.”

The US military’s Central Command said American forces had launched strikes “to impose heavy costs for targeting and attacking commercial shipping crewed by innocent civilians in an international waterway.”

It said it hit Iranian targets including air defense systems, radars and over 60 small boats used by Iran’s paramilitary Revolutionary Guard.

Those boats have been key to threatening ships in the strait, through which a fifth of the world’s traded oil and natural gas passed before the war. Iran’s ability to bring shipping in the waterway to a near halt during the war proved its greatest strategic advantage as rising prices for energy supplies, fertiliser and food put pressure on the US to make a deal.

The US military remains “prepared to hold Iran accountable when the agreement is not adhered to or obeyed,” it added, saying this round of attacks had ended.