25th August 2026
The latest development is quite a significant escalation, although it is primarily an economic threat rather than a new military ultimatum.
US Treasury Secretary Scott Bessent has announced what Washington calls “Operation Economic Outcast”, a much broader campaign to economically isolate Iran. He has warned that countries and companies continuing to do business with Iran could themselves face US sanctions.
The language Bessent is using is unusually forceful. He has described the objective as “economic asphyxiation” and previously said the new measures would be designed to collapse the Iranian regime. He has specifically warned countries that continue buying Iranian oil, transferring money to Iran or providing shipping services that the full power of the US Treasury could be used against them.
What has actually happened?
The US has imposed sanctions on roughly 60 Iranian-linked entities, people and vessels, targeting networks involved in oil sales, shipping, finance, weapons and sanctions evasion.
But the really important part is the threat of secondary sanctions.
Washington is effectively saying:
You don't have to be Iranian to be punished. If you continue helping Iran, you may become a target yourself.
That puts countries such as China, Turkey and the UAE in a difficult position because Iran still has important trading relationships with them. China is particularly important because it remains the principal destination for Iranian oil exports.
Interestingly, the US has not yet imposed the most severe threatened penalties on Chinese financial institutions. That suggests Washington is applying pressure while still leaving itself room for negotiation, particularly given the importance of US-China relations.
Why is Bessent doing this now?
There is a very important strategic background.
The US-Iran conflict has effectively reached a stalemate. The war has not produced the decisive political outcome Washington wanted, while Iran remains capable of exerting pressure through the Strait of Hormuz.
That gives Tehran a particularly powerful economic weapon.
If Iran can restrict the movement of oil through Hormuz, it can affect not only the US and Iran but the entire world economy.
That is why today's developments are potentially more important than simply another round of sanctions.
Washington is trying to remove Iran's ability to finance itself, while Iran can threaten to make the economic consequences of that policy much wider.
And Iran is pushing back
Iran has already rejected the latest American threats.
Iranian officials have said they will retaliate and have dismissed the American campaign as unlikely to succeed. Iranian officials also believe that China and Russia will resist Washington's attempt to force them to abandon economic relations with Tehran.
That creates the central question:
Can America really force the rest of the world to stop trading with Iran?
The US has enormous financial power because so much international trade passes through the dollar-based financial system.
But Iran has learned over many years how to evade sanctions, while China, Russia and other countries have strong reasons for resisting American pressure.
The oil market is watching very closely
There is an interesting development here given our recent discussions about oil.
Despite the escalation, oil prices actually fell by more than $2 a barrel today as markets judged that the latest measures had not immediately produced another major physical disruption to supplies.
That doesn't mean the danger has disappeared.
It means traders are currently betting that the latest escalation will remain primarily economic rather than immediately developing into another major military confrontation.
But if Iran responds by seriously restricting oil movements through Hormuz, that calculation could change very quickly.
And that is why I think Bessent's speech deserves attention.
Washington is effectively moving from trying to defeat Iran militarily to trying to make it economically impossible for the Iranian government to continue functioning.
The danger is that Tehran may decide that if it is going to suffer economically anyway, it has little to lose by using its remaining leverage over the Strait of Hormuz.
That is the part I would be watching most closely over the next few days.