The conflict in the Middle East escalated on Wednesday, with the U.S. sustaining its ongoing assault of Iran and Israel bombarding sites linked with Tehran’s missile and air-defense systems, although stock futures on Wall Street climbed following a media report on possible secret discussions over a ceasefire.

Tehran has targeted locations in Israel as well as U.S. bases and embassies across the Middle East in retaliation. Iran has also promised to select a new supreme leader to succeed Ayatollah Ali Khamenei, who was killed in an air barrage over the weekend.

Concerns have subsequently risen that the conflict could stretch on longer than President Donald Trump’s initial four- to five-week timeline. A senior U.S. military commander said that American forces were engaged in "24/7 strikes into Iran from seabed to space and cyberspace," adding that further assets would be utilized.

Admiral Brad Cooper, the overall commander of the U.S. campaign, said the continuous assault has degraded Iran’s air defenses and left the country without operational vessels on key waterways, Reuters reported, citing a video briefing.

Israeli Defense Minister Israel Katz also warned that any new leader appointed by Iran could be "an unequivocal target for elimination."

The prospect of a protracted crisis choking off a significant portion of global oil and gas supplies has driven up prices for both, threatening to reignite upward pressure on inflation.

U.S. futures erase losses

On Tuesday, the specter of renewed price gains -- and a potential delay to Federal Reserve interest rate cuts this year -- sparked a jump in U.S. Treasury yields that led to a whipsaw session in U.S. stock markets.

For investors, a central worry is that the violence in the Middle East may cause extended disruptions to tanker traffic through the Strait of Hormuz, a vital waterway through which a significant portion of the world’s oil and gas supplies flows.

Brent crude prices, which were trading at around $73 a barrel prior to the start of the assault on Iran, have risen sharply. The Brent futures contract was last trading hands at $83.48 a barrel, a rise of 1.6%, while U.S. West Texas Intermediate crude future had moved up 0.9% to $75.26 a barrel.

Oil prices jumped by as much as 8% on Tuesday, but later gave back much of it after President Trump suggested that the U.S. may begin to escort ships through the Strait of Hormuz.

Meanwhile, the cost of natural gas, key for everything from electricity to heating, has soared in Europe and Asia. Iranian attacks on a Qatari natural gas site have halted gas flows out of the major producer, crimping supply in several countries reliant on these shipments.

Jitters over rising energy costs have hit stocks in Asia especially hard. Nations in East Asia like South Korea and Japan heavily import oil and gas that goes through the Strait of Hormuz, exposing them to dwindling shipping activity through the narrow geographic passageway south of Iran. South Korea’s Kospi index, in particular, fell so much on Wednesday that trading had to be temporarily suspended.

But futures on Wall Street turned positive, while oil prices moderated, following a New York Times report that Iranian operatives have made an offer to discuss terms for ending the conflict. Citing officials briefed on the outreach, the paper flagged that U.S. officials are skeptical that either the Trump administration or Iran are ready to take such an offramp.

Israeli officials, keen on inflicting maximum damage on Iran’s military apparatus and possibly overthrowing Tehran’s government, have told the U.S. to ignore the approach, the New York Times reported.

In public, Iran’s leaders have not made any moves to try to negotiate with Washington.