The United States struck more than 80 targets inside Iran on Wednesday AEST, hours after three commercial tankers were attacked near the Strait of Hormuz, and Iran answered with drone and missile fire at US-linked bases in Bahrain and Kuwait. It is the heaviest exchange since a June memorandum paused four months of open war between the two countries.

The tankers were hit early Tuesday, Gulf time, off the Omani coast. The Qatari-owned LNG carrier Al Rekayyat took a strike above its engine room: "We are being hit by drone on port side, top of engine room. Status: engine room fire and full of smoke," its captain radioed, according to maritime outlet gCaptain, and the Saudi-flagged crude tanker Wedyan and a third vessel were also damaged. The UK Maritime Trade Operations agency reported no crew casualties. Tehran has not claimed the attacks, and Qatar has taken a position: "We hold Iran fully legally responsible," foreign ministry spokesman Majed Al Ansari said.

US Central Command said its response hit air-defence systems, command networks, coastal radar, anti-ship missile sites and more than 60 Revolutionary Guard small boats, concentrated around Bandar Abbas, Qeshm Island and Sirik in Hormozgan province. The strikes were made "to impose heavy costs for targeting and attacking commercial shipping crewed by innocent civilians in an international waterway," the command said. Washington also reimposed sanctions on Iranian oil sales, effective the same day.

Iran is issuing a serious warning about the consequences of America's breach," Iran's foreign ministry said Wednesday, and the Revolutionary Guard claimed a joint missile and drone operation against 85 US military facilities in Bahrain and Kuwait, a figure no independent source has verified. Al Jazeera reported one Guard member killed in the exchange; Iranian state broadcaster IRIB reported several people injured by shrapnel at Sirik. Neither government has released a casualty toll for the strikes themselves.

The escalation landed in the middle of the six-day state funeral of Ali Khamenei, the supreme leader killed in a February airstrike, whose burial is due at the Imam Reza Shrine in Mashhad on Thursday. His son Mojtaba was declared successor but has not appeared in public since, and Al Jazeera reported officials saying he was wounded in the strike that killed his father. Who is directing Iran's response from day to day cannot be independently verified.

The diplomacy is in about the same condition. The June 17 memorandum of understanding opened 60 days of negotiations; Donald Trump said after the strikes that the agreement was "over" and continued talks a "waste of time", while stopping short of formally ending them. Iranian foreign minister Abbas Araghchi said US actions had "rendered key, fundamental elements" of the agreement ineffective.

Markets moved with the missiles. Brent crude settled 3 per cent higher at US$74.16 on Tuesday and traded above US$76 after the sanctions announcement: the strait carries about a fifth of the world's oil, and Australian petrol prices spiked during Iran's March blockade of it, prompting a fuel excise cut that began unwinding this month. DFAT's advice for Iran remains do not travel, with the Australian embassy in Tehran suspended and consular help all but unavailable. As of Thursday morning, Khamenei's burial, Iran's next move and the fate of the 60-day talks were all due inside the same day.