A New Chapter in US-Iran Economic Warfare
Former President Donald Trump has unveiled a new economic campaign aimed at crippling Iran’s global connections, a strategy his Treasury secretary Scott Bessent has dubbed Operation Economic Outcast. The initiative seeks to isolate Tehran by threatening foreign governments, banks and companies with sanctions if they continue trading relationships with the Islamic Republic.
This approach comes after military options failed to compel Iranian capitulation or regime collapse. With oil exports severely constrained and ordinary Iranians facing soaring inflation and currency instability, the US administration believes further economic strangulation will force Tehran to surrender. Yet Iranian officials counter that such pressure only strengthens their resolve to endure rather than negotiate from weakness.
Iran’s Counter-Strategy: Making Economic Pressure Prohibitively Costly
Mohsen Rezaei, head of Iran’s supreme national security council, has framed participation in Washington’s economic campaign as an “act of war,” warning that neighbouring states who cooperate could face serious consequences. He has even threatened to disrupt Gulf oil exports through alternative routes designed to bypass the Strait of Hormuz.
This rhetoric reflects a calculated strategic approach: Iran cannot defeat the US economically, but it seeks to make the economic strangulation of itself prohibitively expensive for Washington and its allies. Tehran’s game plan appears to involve tightening pressure on Hormuz, threatening infrastructure that enables alternative oil-export routes and increasing pressure on US interests throughout the region.
The strategy combines bargaining with endurance—seeking an agreement while demonstrating resilience against US pressure without abandoning core principles. Iranian officials argue that successive escalations only validate their position that relinquishing leverage would simply leave them vulnerable to the next round of US demands.
China’s Defiant Stand and the Risk of Global Financial Fragmentation
The success of Trump’s economic offensive hinges on convincing much of the world, particularly China, to comply with secondary sanctions. However, Beijing appears to be moving in the opposite direction entirely. Chinese authorities have instructed firms not to follow US sanctions targeting Chinese buyers of Iranian oil, while its highest court recently highlighted a ruling penalising a Singaporean company for complying with American demands.
Beijing has now warned it will take “all necessary measures” if Chinese interests are targeted further. This creates a significant dilemma for Washington: tolerate continued trade between Iran and China and other partners, or dramatically escalate coercion that risks multiplying economic confrontations at a time when international cooperation is essential for genuine isolation of Tehran.
Treasury Secretary Bessent acknowledged these dangers when questioned about immediately imposing the most sweeping secondary sanctions. “Why would I want to blow up the global financial system?” he responded—a striking admission for an operation promoted as an “economic D-day.”
An Enduring Standoff with Mounting Risks
With US midterm elections approaching, the White House has strong incentives to avoid further escalation that could disrupt Gulf energy flows and drive fuel prices higher. Tehran appears to understand this vulnerability, gambling that it can reroute sufficient commerce while imposing enough costs that Washington eventually prefers settlement over continued confrontation.
This creates a dangerous contest of endurance where Washington bets that Iran’s economy will collapse first, while Tehran wagers that US tolerance for the war and its mounting economic costs will break before theirs. The pattern repeats itself from previous Trump administration attempts: abandoning the 2015 nuclear deal in pursuit of better terms led Iran to expand its nuclear programme rather than concede; military conflict was expected to force acceptance of US demands but instead expanded the war and elevated Hormuz as an Iranian leverage point.
Unless Trump begins thinking several moves ahead, this latest attempt to force Iranian submission could leave the US with even higher energy prices, a more confrontational adversary and yet another unanticipated escalation.
Why it Matters
This escalating economic standoff represents a fundamental failure of US strategic thinking in the region. Rather than developing a coherent approach that accounts for Iranian resilience and global interdependencies, Washington risks triggering a dangerous cycle of retaliation that threatens global energy security, fragments international financial systems, and ultimately undermines American influence worldwide. The stakes extend far beyond Tehran and Washington—entire regions depend on stable energy flows, and any major disruption could reverberate through global markets with consequences felt worldwide.
