Getty ImagesThe US announced a host of sanctions against Iran and threatened its supporters in what Treasury Secretary Scott Bessent said was “the single greatest financial offensive ever”.
Labelling it an “economic D-Day” for Iran, Bessent said the US would sever all economic ties with the country and added that any nation financially partnering with Iran would also be isolated.
However, the latest threat to the Iranian regime follows several U-turns and extended deadlines from the White House in its efforts to end the conflict.
The war has led to hikes in global oil prices, and in response to the latest threat Iran warned it would shut down all oil exports from the region if the war continued.
One fifth of the world’s oil and gas usually passes through strait, a narrow waterway south of Iran, but the flow has been effectively blocked by the country since the conflict began at the end of February, leading to higher oil prices globally.
At a press conference on Monday outlining what has been called “Operation Economic Outcast”, Bessent said the US was launching an “economic onslaught against Iran’s financial connections around the globe”.
“Iran now faces a very clear choice with only two paths before them: complete global isolation….or a path back to normalcy with an opportunity to rejoin the global economy,” he said.
The treasury secretary claimed America was “no longer managing the Iranian threat, we are ending it”.
Bessent said the Treasury Department had mapped networks, facilitators and financial channels used by Iran to evade sanctions to trade oil.
The department said it has issued determinations against five sectors: digital assets, technology, gold, aviation and shipping. The Treasury has also imposed sanctions on almost 60 entities, individuals and vessels.
Bessent said that such actions would “tighten the noose and block every potential source of revenue” for Iran’s Islamic Revolutionary Guard Corps and the wider Iranian regime.
In a warning to governments and entities assisting or trading with Iran, he said they could not “claim they are blind to enabling this activity”.
He declined to highlight specific countries, but said Trump would be phoning world leaders “with specific request to cease their interactions with the regime.”
While he said it was important to give people time to understand the new sanctions, he added: “they should know that that will move very quickly and that we are serious.”
‘Damp squib’
David Oxley, chief climate and commodities economist at Capital Economics, cast doubt on the effectiveness of the sanctions announcement.
“With the renewed US naval blockade already strangling Iran’s oil exports, the direct impact of ‘economic D-Day’ on Iran’s energy revenues will be somewhat of a damp squib,” he said.
“We suspect that the new package will have only a limited direct impact on Iranian energy flows in the short term.”
He said that was partly due to the fact roughly 90% of Iran’s oil goes to China, a country “which has not recognised US sanctions in the past and is unlikely to be cowed this time either”.
Over the course of the conflict so far, previous threats have included Trump saying in April that “a whole civilisation will die tonight” unless Iran agreed a deal to end the war and unblock the Strait of Hormuz.
The US eventually climbed down from that position after mediator Pakistan intervened and called for more diplomacy.
The economic impact of the Iran war is being felt in the US and across the world. Higher oil prices have fuelled concerns over the cost of living, with petrol and diesel prices much higher than they were a year ago.
In the US, gasoline prices have surpassed $4 a gallon and affordability is among the top concerns of American voters ahead of the mid-term elections in November.
On Monday, a barrel of Brent crude, the global benchmark for oil prices, was $92.
Last week, Bessent announced the US government would intervene in the bond markets and buy back more government debt in a bid to boost demand for bonds and lower borrowing rates.
But the impact of the announcenment was short-lived, with long-term borrowing costs bouncing back up a day later.
The Iranian regime already faces tough economic sanctions from the US.
Former US president Barack Obama and several US allies had agreed a deal with the country in 2015 which lifted many sanctions in return for Iran agreeing to limit its nuclear programme.
However, Trump pulled out of that deal in 2018, calling it “defective at its core, and reimposed all US sanctions on Iran.
During Joe Biden’s term as US president, he made some attempts to reinstate the Obama-era deal, but this did not happen.
In April this year, the Trump administration launched a wave of sanctions on foreign banks and firms doing business with Tehran after it became clear its military operations had not caused Iran’s regime to surrender.
