With the two-week truce in its final hours, the US president said he would push the deadline back indefinitely following a request from mediator Pakistan and stressing the need to give Tehran's "fractured" leadership time to form a proposal.

He had previously indicated he would not extend the truce and warned he would resume bombing the Islamic republic when it expired.

"I have... directed our Military to continue the Blockade and, in all other respects, remain ready and able, and will therefore extend the Ceasefire until such time as their (Iran's) proposal is submitted," Trump wrote on social media.

The decision not to carry out fresh attacks on Iran but continue to prevent its ships from passing through the Strait - a major sticking point between the rivals - left traders awaiting clearer developments.

The fate of peace talks in Islamabad was hanging in the balance, with a White House official saying Vice President JD Vance would not travel on Tuesday as previously planned, pending the submission of an Iranian proposal.

Tehran has said it will not attend because of what it said were unreasonable US demands, while the semi-official Tasnim news agency said there was no prospect of officials going at present.

Also Read: Military planners to discuss Hormuz reopening in London

Christopher Wong, a strategist at Oversea-Chinese Banking Corp, said: "The US and Iran may be trying to shore up leverage and playing a game of who blinks first. "Whatever the outcome, the suspense in the interim may see risk appetite being curtailed but when either side blinks, risk proxies could rally."

Both main oil contracts dropped, having risen around 3 per cent on Tuesday.

Equities were mixed following another down day on Wall Street.

Hong Kong, Sydney, Singapore, Manila, Mumbai and Jakarta all fell, while Tokyo, Shanghai, Seoul, Taipei and Wellington rose.

London opened higher, even as data showed UK inflation jumped to 3.3 per cent last month as the Middle East war sent oil and gas prices surging.

Paris and Frankfurt also advanced.

Traders have been struggling to find direction this week after Tehran said on Friday it would allow ships through the Strait of Hormuz - which it had effectively closed since war began on February 28 - before pulling back a day later, citing the US blockade and seizure of a ship.

Trump has similarly accused Tehran of violating the ceasefire by harassing vessels in the waterway, the transit passage for about one-fifth of global oil.

Read More: Trump says he does not want to extend truce as expiry nears, US seizes tanker

The developments sent crude swinging wildly, though it has held below $100, while equity markets have been less volatile on lingering optimism the two sides will eventually reach a deal to end the seven-week conflict that has hit the global economy.

"With markets surging amid optimism that the war is soon going to end, and the Hormuz Strait to open, markets are now more cautious," wrote Fawad Razaqzada, an analyst at FOREX. "If there’s no deal, I would imagine that oil prices could climb back above $100, which would likely invite pressure on equities."

Investors are also keeping tabs on the confirmation hearing by senators of Kevin Warsh, Trump's pick to replace Federal Reserve boss Jerome Powell, whose term ends next month.

Warsh insisted he would not be controlled by the president as he fielded questions on his assets and central bank independence during his confirmation hearing.

The former Fed governor emphasised his commitment to "ensuring that the conduct of monetary policy remains strictly independent", adding he would "absolutely not" be Trump's puppet.

Trump, since his return to office last year, has severely criticised Powell for not slashing rates more aggressively, and told CNBC on Tuesday he would be disappointed if the new chair did not swiftly lower borrowing costs.