The United States has launched a new round of harsh economic penalties against Iran, with Treasury Secretary Scott Bessent announcing Monday that the measures are designed to cut off every potential revenue stream for Tehran, warning any nation maintaining economic ties with the Iranian government will face U.S. retaliation.
In remarks to a Washington press conference, Bessent emphasized that operating in ambiguous gray economic zones related to the ongoing Middle East conflict is no longer tolerated by the U.S. “Let there be no ambiguity as to the position of the United States,” he stated. “An economic engagement of any kind with this murderous regime will expose those responsible to the full reach of American power.”
While Bessent declined to name specific countries that could face secondary U.S. sanctions, the move targets China, Turkey, and the United Arab Emirates—Tehran’s three largest remaining trade partners. Just one week before the announcement, the UAE, long a key hub for Iranian imports, already suspended all bilateral trade with Iran in a pre-emptive step to comply with the incoming U.S. measures.
The announcement comes as Iran’s national currency, the rial, has plummeted to an all-time historic low. When currency markets opened Monday, the free-market exchange rate hit 2.02 million rial to one U.S. dollar, far outstripping the Iranian central bank’s official pegged rate of roughly 1.5 million rial to the dollar, which has little bearing on most ordinary Iranians’ daily transactions.
Economic pressures on Iran have been mounting for months: even before the U.S. and Israeli military strike on Iran on February 28, the country was grappling with double-digit inflation and negative GDP growth. Nearly six months of open conflict have worsened the crisis, pushing the rial to repeated record lows and making basic food staples unaffordable for many Iranian households. Since the outbreak of war, domestic rice prices have surged roughly 60%, while beef prices have jumped more than 150%. The International Monetary Fund now projects Iran’s gross domestic product will contract by more than 5% this year.
To date, however, crippling economic pressure has failed to translate into meaningful domestic political pressure on the Iranian regime, which has retained a critical strategic leverage over global energy markets by shutting down most traffic through the Strait of Hormuz— the strategic waterway that carried one-fifth of the world’s traded oil before the conflict began. Iran’s repeated attacks and threats against commercial shipping in the strait have brought transit to a near-standstill, inflicting widespread damage on the global economy and increasing political pressure on U.S. President Donald Trump ahead of upcoming congressional elections.
The conflict has since devolved into a standoff over control of the key waterway. Tehran has refused to fully reopen the strait to international traffic unless it is allowed to charge transit fees to commercial vessels. Regional diplomatic efforts are ongoing: Tehran and Muscat are reportedly in the final stages of negotiating a joint management plan for the strait, and Oman’s foreign minister is scheduled to travel to Tehran Tuesday to advance the talks.
The Trump administration says the expanded sanctions are an effort to break the current impasse. Ahead of Bessent’s announcement, Trump took to social media to declare, “IRAN IS COMPLETELY COLLAPSING!!!” In a Sunday opinion piece published in the *Financial Times*, Bessent argued that Trump’s existing policies have already gutted Iran’s economy to an unprecedented degree. “President Trump decimated Iran’s economy to a point where the rial has never been weaker and inflation has rarely been higher,” Bessent wrote. “The regime’s final refuge now lies in the self-deception of fearful nations that still believe accommodating aggression can secure a durable peace.”
Iran has already warned that it will respond harshly to the new U.S. measures. “Any escalation of this situation will undoubtedly bring about consequences,” Iranian Foreign Ministry spokesperson Esmail Baghaei told reporters in Tehran Monday. “Our hands are not tied,” he added.
Amid rising escalation, regional diplomatic efforts to de-escalate tensions continue. Pakistan, which brokered a 60-day ceasefire between Washington and Tehran in June, has sent a high-level delegation headed by army chief Field Marshal Asim Munir to Tehran Monday, with the goal of encouraging both sides to return to negotiating the table. Two senior Pakistani officials confirmed the trip on condition of anonymity, as they were not authorized to speak publicly about the sensitive diplomatic mission.
A person familiar with private discussions confirmed to reporters that Trump spoke with Munir ahead of the army chief’s trip to Iran, a conversation first reported by Reuters citing Pakistani sources. Pakistan’s military has only publicly confirmed Munir’s visit, saying its goal is to reduce regional tensions. Munir was accompanied by Pakistani Interior Minister Mohsin Naqvi and other senior security and diplomatic officials, and met with Iranian Interior Minister Eskandar Momeni shortly after arriving in Tehran. He is expected to stay overnight in the Iranian capital for additional meetings with Iranian President and other top government officials before returning to Pakistan. This marks Munir’s second trip to Tehran this year; his May visit helped lay the groundwork for the June ceasefire memorandum signed by the U.S. and Iran.
For many ordinary Iranians, however, there is little optimism for a near-term resolution to the crisis. In downtown Tehran, 73-year-old Sadegh Mahmoudi told reporters he joined a queue of a dozen Iranians to exchange his remaining rial savings for U.S. dollars to protect his savings from further devaluation. “There is no hope for a deal and peace,” he said.