Iran Tensions Rise as Washington Warns Trading Partners of Secondary Penalties

The US Treasury announced Operation Economic Outcast, a new round of sanctions on nearly 60 Iranian-linked entities and a warning to other countries that they face secondary penalties if they continue trading with Iran. Iran tensions have intensified as Treasury Secretary Scott Bessent outlined the drive to isolate Tehran economically.

US Launches Operation Economic Outcast

Treasury Secretary Scott Bessent described the move as an economic onslaught to isolate Iran until it stands alone, following the expiration of a June Iran-US MoU aimed at ending the war and addressing its nuclear program. [1] Bessent said the US was launching an “economic onslaught” against Iran’s financial connections to sever its economic pipeline “until Tehran stands alone.” [1] He added that President Donald Trump was already making phone calls to world leaders with specific requests to cease trading with the Iranian regime. [1] Bessent stated, “We are level-setting with every country to tell them our expectations. We know who they are. They know who they are, so when the hammer of US Treasury actions falls upon them, they will have no one to blame but themselves.” [1] The announcement came a week after Trump declared he was preparing to impose the “most crushing economic operation” against Iran. [1] Bessent told reporters that Iran now faces a very clear choice, with only two paths before them: complete global isolation and a subsistence economy, or a path back to normalcy with an opportunity to rejoin the global economy. [3] He declared, “Today, we are launching Operation Economic Outcast to foreclose every other option available to the Iranian regime.” [3] Bessent further said, “America is no longer managing the Iranian threat. We are ending it.” [3]

Targets and Scope of New Sanctions

The sanctions target entities in shipping, oil, crypto, gold, and aviation across multiple countries including China, the UAE, Singapore, and France, but spare major Chinese banks for now while expanding secondary sanctions risks. [1] The Treasury Department announced it is sanctioning nearly 60 corporations, individuals and vessels in multiple jurisdictions that it says enable the Iranian regime’s “recklessness.” [1] That list includes multiple Chinese nationals. [1] Bessent said, “No one is above the reach of US sanctions.” [1] The Treasury Department announced new sanctions on 60 individuals, entities and vessels but that list did not include any of the Chinese financial institutions suspected of facilitating Iran's oil trade. [2] Bessent said the US was expanding the scope of commercial activities that could be subject to secondary sanctions in five sectors of the Iranian economy: digital assets, gold, technology, aviation and shipping. [2] Tuesday's action targeted other businesses in China, the UAE, Singapore and several other countries, including a cooking-oil refinery in France. [2] Bessent said he previewed a “major announcement” of sanctions on a financial institution by the end of the week. [2] He added that if they facilitate transactions and are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted. [2]

Iran's Response and Defiance

Iranian officials including Economy Minister Ali Madanizadeh rejected the measures, stating the country is prepared for an economic war and predicting failure for the US. [1] The Iranian Economy Minister Ali Madanizadeh, in response to Bessent’s comment, said, “The government is fully prepared for this economic war. You will fail this time too.” [1] Iran has denounced the sanctions, stating that it is prepared for an economic war. [1] After the announcement, Iranian Economy Minister Ali Madanizadeh said, “We are fully prepared for the US sanctions.” [5] He added, “Naturally, the enemies intend to launch an economic terrorist attack on us, but we also have our own tools and know how to play the game. Our defense is no longer so defensive; the enemies should wait for an attack.” [5] Brigadier General Hossein Mohebbi, a spokesperson for Iran's Islamic Revolutionary Guard Corps, vowed heavy blows to US vital interests and energy chokepoints if Iran's infrastructure is threatened. [5]

Context of the Seven-Month War

The nearly seven-month US-Iran war has blocked shipping through the Strait of Hormuz, elevated global energy prices, and seen the UAE suspend all trade with Iran. [1] The US war with Iran has now lasted almost seven months. [1] Last week, the Iran-US MoU, signed on 17 June, expired. [1] It marked the end of a 60-day deadline during which both countries were supposed to end the war and reach an agreement on Iran’s nuclear programme. [1] Trump earlier demanded that Tehran “put up the white flag of surrender.” [1] He also threatened to make the Strait of Hormuz US territory. [1] Trump said, “After we finish defeating Iran, which is being very badly defeated, I’ll be declaring the Hormuz Strait a territory of the United States.” [1] As the war with Iran nears its six-month mark, Treasury Secretary Scott Bessent said the US was launching an “economic onslaught” against Iran's financial connections around the globe. [2] Trump's war with Iran, which has pushed energy prices higher worldwide, is about to hit its six-month mark. [2] While heavy fighting has subsided, diplomatic efforts to end the war have stalled and oil and raw material shipping through the Strait of Hormuz remains blocked, keeping energy prices elevated. [2] The UAE, a US ally, also announced last week that it was suspending all trade, commercial exchanges, and financial transactions with Iran. [1]

Regional Diplomatic Reactions

Pakistan's army chief held talks with Iranian leaders focused on preventing escalation, reopening the Strait of Hormuz, and pursuing a negotiated settlement. [5] Pakistan's army chief Asim Munir held discussions with Iran that were focussed on measures including the prevention of a further escalation of the conflict and the reopening of the Strait of Hormuz, the Pakistani military said in a statement on Tuesday. [5] Munir discussed regional peace and ways to reach a negotiated settlement to disputes, the statement added. [5] Pakistani Interior Minister Mohsin Naqvi spoke with Iranian President Masoud Pezeshkian on Tuesday morning to discuss "the steps needed by both sides for restoring the Islamabad Memorandum of Understanding." [5] Naqvi said in a post on X/Twitter that the Iranian President candidly shared his Government’s perspective and concerns, and they had a very constructive exchange on the issues involved. [5] Naqvi said that the talks were focused on decreasing tensions in the Middle East and creating a path to peace. [5] He added that the meeting with the president ended on a "highly positive note." [5]

Expert Views and Outlook

Analyst comments indicate that the pressure campaign will take time and may require concessions, plus the decision to avoid immediate global financial disruption. [2] Daniel Fried, a former US State Department sanctions coordinator who is now with the Atlantic Council, said that the announcement "did not live up to the hype," but economic pressure is better than restarting military conflict. [2] The pressure campaign on Iran will take time to work and patience and possibly require some concessions on the part of the Trump administration to secure cooperation, he said. [2] Fried added, "You're going to have to get the Gulf countries to agree, and you're going to have to listen to what they want, and be steady." [2] Bessent said, “Why would I want to blow up the global financial system? We believe that it is important to level set and give people a cure period, but they should know that that will move very quickly and that we are serious.” [2]

What to watch next: Bessent said he previewed a “major announcement” of sanctions on a financial institution by the end of the week, while Trump and Chinese President Xi Jinping are scheduled to meet in Washington in late September.