Israel struck targets in Iran and Lebanon, while Tehran launched its own barrage of counter-attacks, as the conflict in the Middle East further widened on Tuesday.

U.S. President Donald Trump has suggested that Washington, which has been carrying out a joint campaign with Israel against Iran, could pursue prolonged fighting in the region. Trump, speaking at his first public event since the U.S. and Israel hit Iran with initial strikes over the weekend, said the U.S. had a "virtually unlimited supply" of some types of weapons.

Trump previously said U.S. involvement in the conflict would last for the next four to five weeks.

Meanwhile, Israeli Prime Minister Benjamin Netanyahu claimed the latest wave of attacks -- which come after a brief, U.S.-backed 12-day war with Iran in June last year -- was "not going to take years."

"It’s not an endless war," Netanyahu said on Fox News on Monday.

Israel’s military has said it has attacked targets in the Iranian capital of Tehran, as well as command centers and weapons storage facilities of Iran-supported Hezbollah in Beirut.

Iran has continued its own retaliatory responses on sites throughout the Middle East. The U.S. embassy in Saudi Arabia sustained minor damage from Iranian drone strikes, according to the New York Times, citing the Saudi Defense Ministry. Amazon’s cloud-computing business also said two of its facilities in the UAE and Bahrain were hit by drone strikes and were "significantly impaired."

Dubai’s international airport, a major hub for global travel, has also been attacked. Hotel and airline stocks were broadly lower on Tuesday, extending underperformance in the prior session.

Oil flow disruption fears

Oil prices surged, adding to the previous session’s sharp gains, as threats to flows through the Strait of Hormuz continued to underpin supply disruption worries.

Brent futures soared 4.3% to $81.10 a barrel and U.S. West Texas Intermediate crude futures rose 4% to $74.05 a barrel.

Both contracts closed more than 7% higher after climbing as much as 13% to one-year highs on Monday.

Tensions have intensified after Iranian officials vowed to attack any ship attempting to pass through the Strait of Hormuz, raising the prospect of disruption to crude flows from the major Gulf producers.

"The sharp move reflects a rapid repricing of supply risk as markets grapple with the prospect of prolonged conflict and constrained energy exports,” Laurence Booth, Global Head of Markets at CMC Markets, told Investing.com.

Still, analysts at Vital Knowledge have argued that the OPEC+ producer group’s recent willingness to increase output could provide a modest buffer to possible major stoppages of oil flows.

Fears over the choking off of key oil supplies weighed heavily on markets in Asia, the destination for much of the oil flows. Stocks in South Korea, Tokyo and Taiwan all dropped. European markets declined as well.

In the U.S., stock futures pointed to a negative start to trading, despite a rebound on Monday that widely pared back early heavy losses in equities.

Spot gold prices sank as bullion’s safe-haven appeal during times of geopolitical stress was dented by a strengthening in the U.S. dollar.