The United States has rolled out a fresh wave of economic sanctions targeting Iran and its network of trading partners, warning that any nation continuing commercial ties with Tehran faces severe repercussions. The move comes as Iran’s national currency hit a historic nadir, with the rial collapsing to 2.02 million to the US dollar in early trading, underscoring the mounting economic strain on the Islamic Republic amid an ongoing conflict with Washington and Israel.
Economic Warfare Intensifies
U.S. Treasury Secretary Scott Bessent announced the new sanctions on Monday, describing them as part of “Operation Economic Outcast,” a campaign designed to isolate Iran from the global financial system. Speaking to reporters, Bessent emphasized that the administration is giving countries a window to cut their connections with Iran before harsher measures take effect.
“Why would I want to blow up the global financial system?” Bessent remarked, explaining that the US is adopting a measured approach to avoid destabilising international markets. The Trump administration appears to be pivoting towards economic warfare after depleting its stockpiles of precision weaponry and facing an increasingly defiant Iranian stance.</ Defence Secretary Pete Hegseth later clarified that military action could resume if diplomatic and economic pressure proves insufficient.
The sanction package targets nearly 60 entities linked to Iran, accusing them of involvement in nuclear and missile development, cyber operations, and illicit oil trade. Among those named are Hong Kong-based Sweet Ocean Industrial Limited and Shenzhen Huamei, a Chinese firm alleged to support Iran’s weapons programmes. Bessent made clear that no country is immune: “No one is above the reach of US sanctions,” he stated, even as the US maintains a delicate trade truce with China.
Global Trade Partners Face the Music
The new measures signal a stark warning to Iran’s major trading partners, including China, Turkey, and the United Arab Emirates. Bessent indicated that the US is “level-setting” its expectations with every nation, leaving them with no excuse when sanctions are enforced.
The UAE’s recent decision to suspend all trade and financial transactions with Iran—prompted by a reported missile strike on the Gulf state—was hailed by the US as a positive step. “It’s not a coincidence,” Bessent noted, suggesting other nations may soon follow suit under similar pressure. Yet Iranian officials remain defiant. Parliamentary Speaker Mohammad Bagher Qalibaf dismissed US economic leverage, asserting that Iran’s trading partners have made it clear they do not heed US threats.
Iran’s Economy in Free Fall
The rial’s collapse reflects the broader economic crisis gripping Iran. Prior to the US-Israeli strikes on February 28, the currency was already under pressure due to inflation and stagnant growth. Now, with nearly six months of conflict behind it, the situation has deteriorated sharply. The official Central Bank rate stands at approximately 1.5 million rials per dollar, but the market rate—more reflective of everyday reality—has doubled.
Everyday Iranians are feeling the pinch. Rice prices have surged by around 60 per cent since the war began, while beef costs have skyrocketed by over 150 per cent. The International Monetary Fund projects that Iran’s economy will contract by more than 5 per cent this year, marking one of the deepest recessions in recent history.
Despite these hardships, public dissent remains limited. Iran continues to wield strategic leverage through its control of the Strait of Hormuz, a critical chokepoint through which roughly one-fifth of global oil shipments pass. By threatening to disrupt traffic in the strait, Iran has inflicted economic damage on its adversaries and created pressure on President Trump ahead of the US congressional elections.
Diplomatic Overtures Amid Tensions
Amid the escalating crisis, Pakistan has stepped up its mediation efforts. A high-level delegation led by Field Marshal Asim Munir travelled to Iran on Monday to encourage renewed dialogue between Washington and Tehran. The visit follows a previous trip in May that helped pave the way for a June agreement between the US and Iran.
According to senior officials familiar with the talks, Munir met with Iranian Interior Minister Eskandar Momeni and was expected to address other senior officials, including President Masoud Pezeshkian. The Pakistani army chief also spoke with US President Donald Trump ahead of his arrival in Tehran, according to a source familiar with the conversation.
Yet not all Iranians see hope for resolution. In downtown Tehran, 73-year-old Sadegh Mahmoudi joined a queue of about a dozen people seeking to exchange US dollars, hoping to protect his savings from further depreciation. “There is no hope for a deal and peace,” he said, embodying the growing frustration within the country.
China in the Crosshairs
While the US has hinted at targeting China for facilitating Iranian oil transactions, experts suggest the administration may exercise restraint given the timing—Chinese leader Xi Jinping is expected to visit Washington shortly. Ali Wyne, a senior adviser on US-China relations at the International Crisis Group, noted that “thus far, despite threatening severe economic consequences for countries that do business with Iran, [Trump] has largely given China a pass.”
Nonetheless, Bessent made it clear that China cannot remain insulated indefinitely. “If they facilitate transactions and are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted,” he warned. The challenge for Washington lies in balancing pressure on Iran with avoiding a broader economic confrontation with China, the world’s largest trading partner.
Oman-Iran Negotiate Strait Management
In a parallel development, Iran and Oman are reportedly nearing an agreement on joint management of the Strait of Hormuz, the vital maritime corridor that has become a focal point of the regional conflict. Oman’s foreign minister is scheduled to visit Iran on Tuesday to finalise the arrangement, offering a glimmer of de-escalation amid rising tensions.
The strait’s closure or partial shutdown has sent shockwaves through global energy markets, highlighting the war’s far-reaching economic implications. As the battle for control of this narrow waterway continues, both sides appear increasingly willing to explore diplomatic solutions to prevent further disruption.
Why it Matters
The escalation of US economic sanctions against Iran marks a critical turning point in a conflict that has already reshaped global energy markets and strained international diplomacy. With Iran’s currency collapsing and its economy contracting sharply, the humanitarian toll on ordinary citizens grows ever more severe. Yet Iran’s strategic control of the Strait of Hormuz—a route through which a fifth of the world’s oil transits—remains a powerful bargaining chip, ensuring that even as economic pressure mounts, Tehran continues to exact a heavy price on the global economy. The coming weeks will test whether financial isolation can force a political settlement, or whether the conflict will spiral further into a broader regional crisis with profound implications for global stability and energy security.