Trump says Iran should wave the white flag of surrender

US President Donald Trump on Tuesday dismissed Iran's military capability and said Tehran "should wave the white flag of surrender" but is too proud to do so.

Trump told reporters in the Oval Office that Iran's military has been reduced to firing 'peashooters' and that Tehran privately wants to make a deal despite its public sabre-rattling.

"They play games, but let me just tell you, they want to make a deal. And who wouldn't, when your military is totally gone?" he said.

Trump heaped praise on the US blockade of Iranian ports in the region. "It's like a piece of steel. Nobody's going to challenge the blockade. And I think it's working out very well," he said.

When asked what Iran would need to do to violate the ceasefire, Trump said: "Well, you'll find out, because I'll let you know ... They know what not to do."