Nearly six months since the United States and Israel launched the first missiles in their war on Iran, Washington is pivoting to a strategy of tougher sanctions and economic isolation in a bid to force Tehran to accept its terms for a peace deal. On Monday, US Treasury Secretary Scott Bessent announced “Operation Economic Outcast”, targeting Tehran’s remaining sources of revenue while also threatening penalties against those who continue doing business with Iran. Bessent described the latest wave of sanctions as “the single greatest financial offensive ever” against Iran, and warned that banks and businesses would share in Iran’s isolation if they refuse to cooperate.
Gulf states have repeatedly found themselves caught in the crosshairs during the US-Iran war as Iran has targeted US military assets and infrastructure in neighbouring countries. Economic pressure may appear preferable to another round of US and Israeli missile strikes. But analysts warn the strategy carries its own risks, with Iran potentially responding to mounting economic pressure by targeting more US assets and energy infrastructure across the region.
Iran’s Secretary of the Supreme National Security Council Mohsen Rezaei said last week that if “any countries surrounding Iran join the Americans in their economic war, not a drop of oil will leave the Persian Gulf and the strait of Hormuz”. In peacetime, one-fifth of the world’s oil and natural gas is shipped by Gulf producers through the critical waterway, which has become the main bone of contention in the war since Iran effectively closed it to shipping at the start of the war. Iran’s stance leaves Washington’s Gulf allies facing an uncomfortable paradox: the US military presence helps protect them from Iranian missiles and drones, but also makes their territories potential targets.
Now, because of their security relationship with the United States, they are under increasing pressure to cut economic ties with Iran, which could provoke further Iranian retaliation and risk drawing them deeper into the conflict, experts say. While the United Arab Emirates (UAE) moved last week to decisively cut economic ties with Iran, other Gulf countries such as Saudi Arabia, Qatar and Oman may have different strategic calculations to make. Analysts say they have strong incentives to preserve diplomatic channels with Tehran and to push for a deal that could reopen the Strait of Hormuz.
Bessent described the US measures aimed at isolating Iran as “economic D-Day”. While the US and other countries have sanctioned Iran’s oil and financial sectors for decades, the latest wave will target five of Iran’s most important remaining economic lifelines: digital assets, technology, gold, aviation and shipping. Bessent also said Tehran’s trading partners are at risk of secondary sanctions if they continue helping turn Iranian oil into revenue.
The Treasury imposed specific sanctions on 60 entities, vessels and individuals across the UAE, Hong Kong, China, Singapore and Switzerland, accusing them of facilitating Iranian trade. But Iranian political analyst Mostafa Khoshcheschm dismissed the announcement as a “political show” intended to intimidate Iran’s neighbours. He compared the campaign with Trump’s “maximum pressure” policy during his first term as US president, which was aimed at forcing Iran to renegotiate the US President Barack Obama-era Joint Comprehensive Plan of Action (JCPOA) on its nuclear programme.
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