Amid trade embargoes, asset freezes and attacks on ships as part of a naval blockade, Washington has announced a plan to enact a new wave of restrictions on Iran, targeting its economy. Treasury Secretary Scott Bessent said last Thursday that the United States was planning to inflict more economic damage on Tehran as early as this week. The US would apply measures that have “never been seen in the history of economic isolation on a country”, Bessent said.
A day later on Friday, President Donald Trump echoed Bessent and said that Iran would be hit hard economically. As the memorandum of understanding (MoU) expired on Monday, Trump called on Tehran to hold up the “white flag of surrender” but insisted that he was in no rush to end the war. Since February 2025, following the start of Trump’s second term in office, Washington has sanctioned “more than 1,000 Iran-related persons, vessels, and aircraft”, the Treasury’s Office of Foreign Assets Control (OFAC) said in May.
Remaining defiant, Iran’s authorities have said they could shift to offensive operations, and are simultaneously prepared to counter a potential ground invasion. According to Mohammad Reza Farzanegan, professor of economics of the Middle East at Philipps-Universitat Marburg in Germany, the naval blockade creates a new situation in which traditional sanctions packages are combined with the use of military force to generate a physical shortage of goods in the Iranian economy. It currently seems that Iran is leaning toward the second option,” he told Al Jazeera.
Farzanegan said that for the US to achieve its goals, namely changing the behaviour of the Iranian government, it should also “open a diplomatic exit and offer it as an option”. If armed conflict does fully resume, he said “the costs will not be confined to the target of sanctions; the global economy will also pay a price” through continued disruptions in the Strait of Hormuz and attacks across the region. Meanwhile, talks have stalled in finding a way out of the war, although Iran’s negotiations have been ongoing with Oman and other mediators over a potential temporary arrangement in the Strait of Hormuz, where one-fifth of the global oil and natural gas used to flow before the war.
Iran’s parliament speaker and top negotiator, Mohammad Bagher Ghalibaf, told state media on Tuesday that the Strait of Hormuz would remain closed until the US meets the conditions of the now-expired MoU. With tensions soaring before the war, Iran’s government delegated some authorities to border provinces to import essential goods and build up inventories. To survive the blockade over recent months, Iran has also focused more on rerouting imports of food, consumer goods and industrial inputs through land borders with Pakistan, Turkiye and others, as well as through the Caspian Sea with Russia and Central Asia.
During the brief ceasefire period established under the MoU, the blockade was lifted for several weeks in late June and early July, enabling the rapid export of oil stored on board supertankers and giving the military time to regroup. But Iran’s oil exports have stopped once again since the breakdown of the deal, and US and Israeli authorities have discussed disrupting Iran’s inland imports to ramp up the pressure. The mounting pressure has only exacerbated Iran’s structural economic issues, rooted in decades of domestic corruption and mismanagement, as well as sanctions and international isolation.
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