The Trump administration is preparing what Treasury Secretary Scott Bessent has described as the “toughest sanctions in history” against Iran, promising a coordinated campaign intended to economically isolate Tehran and punish countries, companies and financial institutions that continue providing it with an economic lifeline. But before Washington has even unveiled the full package, Iran has delivered a warning of its own: countries that participate in America’s economic campaign could be treated as enemies, with their interests potentially becoming targets for retaliation. Reuters

That leaves governments across the Middle East and beyond facing an increasingly dangerous calculation. Washington is asking allies and trading partners to help squeeze an Iranian economy already battered by sanctions and nearly six months of war, while Tehran is warning those same countries that cooperation with the United States could expose their oil exports, infrastructure and other economic interests to attack. For governments caught between the two, the question is no longer simply whether they agree with American policy toward Iran. They must weigh the economic consequences of defying Washington against the security consequences of cooperating with it.

Editor’s note: Treasury Secretary Scott Bessent is scheduled to detail the administration’s new Iran measures at
2 p.m. EDT Monday, Aug. 24. This report reflects what has been announced and independently reported as of Aug. 23 and can be updated after Treasury releases the full package. Reuters

Washington Is Preparing an Unprecedented Economic Campaign

Bessent has promised what he calls the greatest coordinated economic isolation campaign ever undertaken, saying the administration intends to enlist American allies and aggressively enforce restrictions against governments, businesses and financial institutions that continue transferring money to Iran or purchasing its oil. President Donald Trump has similarly warned of economic consequences for countries providing Iran with “any type of lifeline,” as Washington shifts toward economic pressure in an attempt to further weaken Tehran after months of military conflict. Reuters

The administration is not beginning from scratch. Treasury has spent months expanding its Economic Fury campaign against Iranian military procurement, shadow banking and sanctions-evasion networks. On Aug. 7, the Treasury Department announced sanctions against networks operating across several countries that it said helped Iran’s clandestine banking system move hundreds of millions of dollars. Earlier actions targeted individuals and companies in China and Hong Kong accused of facilitating weapons procurement and financial transactions connected to Iran’s Islamic Revolutionary Guard Corps and Ministry of Defense. U.S. Department of the Treasury

What Washington plans to announce Monday appears intended to take that pressure considerably further. Bessent has warned governments and businesses that continued trade with Tehran could expose them to the full weight of American economic enforcement, effectively forcing countries that may have no sanctions of their own against Iran to consider what continued commerce with Tehran could cost them elsewhere. The approach depends heavily on the same American financial leverage examined in our recent reporting on sanctions against the International Criminal Court: access to U.S. markets, banks, dollars and financial infrastructure gives Washington tools capable of influencing economic decisions far beyond America’s borders. Anadolu Agency

Iran Is Issuing an Ultimatum of Its Own

Iran’s response has been unusually explicit. Mohsen Rezaei, the recently appointed secretary of Iran’s Supreme National Security Council, warned neighboring governments against participating in what Tehran calls America’s “economic war.” Rezaei said countries imposing economic restrictions on Iran would be regarded as enemies and warned that Tehran could retaliate against their interests. AP News

The threat significantly raises the stakes for governments considering cooperation with Washington. Iran is not merely threatening diplomatic retaliation or reciprocal economic restrictions. Rezaei specifically connected participation in the American campaign with potential attacks against regional economic interests, including oil-export infrastructure and routes intended to move energy around the Strait of Hormuz. His warning suggested that neighboring states should not assume bypassing the strait would necessarily protect their exports if they join Washington’s effort to isolate Tehran. AP News

Iranian Foreign Minister Abbas Araqchi has meanwhile dismissed the coming sanctions as another failed attempt to force Tehran into submission. Iran enters this confrontation from a position of severe economic strain: its economy is already burdened by extensive sanctions, infrastructure has been repeatedly damaged during the war, and oil exports and shipping have been heavily disrupted. Yet Iranian leaders continue to argue that escalating economic pressure will not produce the political outcome Washington wants. Reuters

The Strait of Hormuz Makes the Threat Global

Iran’s threats carry particular weight because of what has already happened in the Strait of Hormuz. Shipping through the critical waterway has been brought close to a standstill during the conflict, with Tehran refusing passage to unauthorized oil tankers and threatening military action against vessels attempting to transit without approval. The disruption has already contributed to higher global oil prices, demonstrating how quickly a regional confrontation can produce economic consequences far beyond the countries directly involved. Reuters

In peacetime, the strait is one of the world’s most important energy chokepoints, connecting Persian Gulf producers with global markets. That geographic reality has encouraged governments and energy companies to develop alternative export routes designed to reduce their dependence on Hormuz. France and Saudi Arabia have recently discussed alternative trade connections intended to bypass the strait, while Iraq and Iran have reached arrangements concerning the transit of Iraqi oil through Hormuz. AP News

Rezaei’s warning is therefore significant precisely because it extends the threat beyond the chokepoint itself. If Iran were capable and willing to attack pipelines, ports, terminals or other routes used to bypass Hormuz, regional producers could face a considerably broader vulnerability than a blockade of the strait alone. Whether Tehran would actually carry out such attacks is unknown, and Iranian threats should not be treated as proof of future military action. But governments making decisions about joining Washington’s sanctions campaign cannot simply disregard the possibility when Iranian officials are publicly putting it on the table.

Gulf States Face an Uncomfortable Choice

For countries around the Persian Gulf, Washington and Tehran are effectively applying pressure from opposite directions. The United States possesses enormous economic leverage through access to American financial markets, dollar transactions, technology and commercial relationships. Iran possesses geographic proximity, missiles, drones and the ability to threaten shipping and energy infrastructure throughout the region. A Gulf government trying to preserve relationships with Washington while avoiding another expansion of the war therefore has strong incentives to avoid becoming trapped completely on either side.

The calculations will also differ from country to country. Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Iraq and other regional states have different relationships with both Washington and Tehran, different energy-export infrastructure and different exposure to military retaliation. Some have invested heavily in routes capable of bypassing Hormuz, while others remain considerably more dependent on the waterway. Treating the Gulf as a single political or economic bloc would obscure how differently each government may assess the risks.

There are already signs that some governments may cooperate more closely with Washington. The Institute for the Study of War reported that the United Arab Emirates was preparing phased trade and financial restrictions against Iran alongside the coming American measures, following Iranian missile attacks against Emirati maritime targets. If other governments take similar steps after Monday’s announcement, Iran’s threats will move from a hypothetical warning to an immediate test of whether Tehran intends to retaliate against countries participating in Washington’s campaign. Institute for the Study of War

China May Be the Hardest Test of Washington’s Strategy

Any serious effort to economically isolate Iran eventually runs into China. Beijing remains Iran’s most important oil customer, with Reuters reporting that China purchases more than 80% of Iran’s shipped oil. That makes Chinese participation—or refusal to participate—one of the most consequential variables in Washington’s strategy. Reuters

The Trump administration therefore faces a much larger question than whether it can sanction another tanker, trading company or small intermediary. If significant Chinese refiners, financial institutions or commercial entities continue providing Iran with revenue, Washington must decide how aggressively it is prepared to enforce its restrictions against companies tied to the world’s second-largest economy. Bessent’s warning suggests the administration intends to pursue businesses involved in Iranian oil and financial transactions, but the precise enforcement mechanisms and targets will not be clear until the new measures are announced. Anadolu Agency

That distinction matters. Secondary economic pressure can be extraordinarily effective when the target must choose between a relatively limited relationship with Iran and access to the much larger American economy. The calculation becomes more complicated when enforcement risks triggering a broader economic confrontation with China. Washington may possess tremendous financial leverage, but deploying all of it against major Chinese institutions could carry costs for the United States and its allies as well.

Iran Is Already Under Severe Economic Pressure

The Iranian government’s defiance should not be mistaken for evidence that existing sanctions have been ineffective. Treasury says its actions have frozen assets, disrupted procurement networks and targeted clandestine systems used to obtain foreign currency and finance military activity. The department’s Aug. 7 action specifically targeted networks it said were helping Iran move hundreds of millions of dollars through a shadow-banking system at a time when Tehran was increasingly desperate for foreign currency. U.S. Department of the Treasury

The war has compounded those pressures. Iranian infrastructure has suffered repeated attacks since U.S. and Israeli strikes began Feb. 28, while the conflict has killed thousands and severely disrupted economic activity. Reuters reports that Iran nevertheless retains missile and drone capabilities and continues pursuing regional security and economic relationships despite the damage. Reuters

This creates an important distinction in evaluating Washington’s strategy. Sanctions can inflict severe economic damage without necessarily producing the political concessions or regime change their architects seek. The administration is betting that a dramatically expanded and internationally coordinated campaign will create pressure that previous restrictions did not. Tehran is betting that it can endure enough economic pain—and impose enough costs on countries participating in that campaign—to prevent Washington from assembling the coalition it needs.

Economic Pressure Could Become Military Escalation

The greatest danger in the current confrontation is that the distinction between economic warfare and military warfare is becoming increasingly blurred. Washington describes sanctions as a way to apply overwhelming pressure without relying exclusively on major new military operations. Iran, however, is explicitly warning that it may answer economic restrictions with attacks against the interests of countries participating in them. Reuters

That creates an obvious escalation pathway. A neighboring government joins American restrictions. Iran retaliates against a port, pipeline, tanker or other economic interest. The affected government responds militarily or seeks American assistance. Washington then faces pressure to retaliate against Iran, potentially widening a conflict the economic campaign was partly intended to manage without another major expansion of military operations.

None of those steps is inevitable, and Iran’s warnings may partly be intended as deterrence rather than a declaration of imminent attacks. But deterrence works by convincing the other side that the threatened consequence is credible. By explicitly tying economic cooperation with Washington to possible retaliation, Tehran is intentionally making the security risk part of every neighboring government’s sanctions calculation.

Diplomacy Is Still Taking Place Behind the Escalation

While Washington and Tehran publicly exchange threats, regional governments are still trying to revive negotiations. Pakistan has taken on a mediation role between the United States and Iran, and Pakistani army chief Asim Munir is scheduled to visit Tehran Monday—the same day Bessent is expected to unveil the new sanctions. Iranian and Pakistani officials say the discussions will address regional peace and security, the American sanctions threat and efforts to revive diplomacy. Reuters

Iranian President Masoud Pezeshkian has also continued publicly advocating a diplomatic resolution despite the increasingly confrontational rhetoric coming from other parts of Iran’s leadership. Egypt has separately been working to revive negotiations between Washington and Tehran. The simultaneous pursuit of diplomacy and escalation reflects the fragmented reality of the conflict: governments are preparing for greater economic and potentially military confrontation while still searching for a way to prevent it. Reuters

Munir’s visit could therefore be more consequential than an ordinary diplomatic meeting. Pakistan will be attempting to mediate just as Washington unveils an economic campaign designed to intensify pressure and Iran threatens retaliation against countries helping enforce it. If negotiations are going to regain momentum, mediators will have to bridge positions that appear to be moving farther apart rather than closer together.

America’s Allies Are Being Asked to Assume Some of the Risk

Washington’s strategy depends on international participation because economic isolation becomes substantially less effective when targeted governments can simply redirect trade elsewhere. The more countries that restrict Iranian transactions, oil purchases and financial relationships, the fewer avenues Tehran has to obtain revenue or foreign currency. That gives the United States a strong incentive to push allies and partners toward coordinated enforcement.

But participation doesn’t distribute the risks evenly. An American financial institution implementing Treasury sanctions faces a fundamentally different threat environment than a port, refinery, pipeline or shipping company located a short distance from Iran. Gulf governments asked to join the campaign are being asked not only to accept potential economic consequences but also to expose themselves to retaliation from a country with military capabilities positioned nearby.

That is what makes Bessent’s stark framing of countries as either supporting Washington or opposing it potentially difficult for some American partners. Governments may agree with the objective of limiting Iran’s military capabilities while remaining unwilling to expose their own infrastructure to attack. Others may believe cooperation with Washington is unavoidable because the economic consequences of resisting American sanctions would be even more damaging. Those decisions will be made according to national interests, not simply loyalty to either Washington or Tehran.

Monday Will Reveal How Far Washington Is Prepared to Go

The most important details remain unknown until Treasury unveils the new measures. The administration has promised extraordinary economic pressure, but there is a substantial difference between threatening unprecedented isolation and constructing a sanctions regime capable of producing it. Which sectors are targeted, how aggressively secondary sanctions are applied, whether major Chinese entities are included and what exemptions or enforcement mechanisms are created will determine how consequential Monday’s announcement actually is.

The response from American allies may be equally important. A sanctions campaign intended to isolate Iran globally will depend on how many governments participate, how quickly financial institutions respond and whether companies decide that continued Iranian business presents unacceptable exposure to American enforcement. Iran’s threats introduce another variable: whether fear of retaliation causes governments to resist, delay or quietly limit their participation.

For now, both Washington and Tehran are trying to convince those governments that refusing their demands will be more dangerous than accepting them.

Caught Between Washington and Tehran

The confrontation developing ahead of Monday’s sanctions announcement illustrates why economic warfare cannot always be separated cleanly from conventional warfare. The United States is attempting to use its enormous financial and commercial influence to deprive Iran of economic relationships around the world. Iran is responding by threatening to use its geographic position and military capabilities against countries that help Washington do it.

Neither strategy stops at the borders of the country employing it. American sanctions can force banks and companies thousands of miles away to reconsider relationships with Tehran because they depend on access to U.S. financial systems and markets. Iranian retaliation could threaten energy infrastructure and shipping routes belonging to neighboring countries whose governments decide to cooperate with Washington.

For America’s allies, particularly those around the Persian Gulf, that creates a choice with potentially serious consequences either way. Refusing Washington’s campaign could jeopardize access to American economic and financial relationships. Joining it could place national infrastructure and commercial interests within reach of Iranian retaliation.

The Trump administration believes overwhelming economic pressure can further isolate Tehran and ultimately force a change in Iranian behavior. Iran is trying to make that strategy prohibitively dangerous by ensuring the costs aren’t borne by Tehran alone.

Monday will provide the first real indication of just how far Washington intends to push that strategy—and how many countries are willing to accept the risks required to make it work.

Sources & Editorial Note

This article is based on current reporting from Reuters and the Associated Press, official U.S. Treasury Department announcements concerning the Economic Fury sanctions campaign, and additional reporting concerning regional diplomatic and security developments. Treasury Secretary Scott Bessent’s promised Aug. 24 sanctions package had not yet been publicly detailed at the time of publication, so this article does not characterize specific measures as final unless they have already been announced. Reuters

Statements concerning potential retaliation against neighboring countries are attributed to Iranian Supreme National Security Council Secretary Mohsen Rezaei. His statements constitute threats by an Iranian official and should not be interpreted as confirmation that Iran has decided to carry out attacks against any particular country, facility or export route. Likewise, statements from the Trump administration concerning the intended effectiveness of the coming sanctions are administration claims rather than independently established outcomes. AP News

Analysis concerning the choices facing Gulf states, possible escalation pathways, Chinese participation and the effectiveness of secondary sanctions describes potential consequences based on the policies and threats currently being reported. It should not be interpreted as a prediction that Iran will attack neighboring states or that Washington’s forthcoming sanctions will succeed or fail.

Primary and supporting sources: U.S. Department of the Treasury; Reuters; Associated Press.