'Economic D-Day': How the US is trying to strangle Iran's economy

After almost six months of military stalemate, the US is reverting to economic warfare in its bid to force Iran's surrender.

In what was bombastically marketed as "economic D-Day", Treasury Secretary Scott Bessent on Monday announced new sanctions to "asphyxiate" the country and sever its links to the global economy.

Here's what you need to know as one of the most sanctioned countries in the world prepares to face yet more sanctions.

What are the new sanctions?

In what he dubbed "Operation Economic Outcast", Bessent said the Treasury would be imposing a new round of sanctions aimed at foreign companies doing business with Iran.

They target several Iranian industries including shipping, aviation, gold, tech, and cryptocurrency.

The goal is to force countries to cut all business ties with Iran, hermetically sealing it off from the global economy.

The Treasury also announced it would sanction almost 60 Iran-linked companies, people and ships in the United Arab Emirates, China, Singapore and Europe.

"No-one is above this," Bessent told reporters, vowing to go further than ever before to trigger Iran's economic collapse.

"Any entity that facilitates money laundering on behalf of Iran will be removed from the US dollar system," he said. "The clock just started ticking."

However, he declined to outline a timeframe that companies will need to comply and indicated the administration will pursue "quiet diplomacy" over an aggressive push for compliance.

Wasn't the US already applying "maximum pressure"?

During both Trump's terms in office, the Treasury has pursued a so-called maximum pressure campaign aimed at crippling Iran's economy.

After withdrawing from the nuclear deal in 2018, the US set about not just restoring Obama-era economic sanctions but intensifying them.

This involved expanding secondary sanctions on key Iranian industries, including oil, petrochemicals and financial institutions.

The measures have succeeded in devastating the Iranian economy. The Iranian rial has crumbled, inflation has surged, and poverty levels have spiked.

But the Treasury has also been reluctant to fully enforce existing sanctions – particularly against Chinese institutions - because of their potentially destabilising impact on the world economy.

Bessent himself acknowledged the dangers during the press conference, intimating that the measures had the potential to "blow up the global financial system".

This has enabled Iran to skirt some of the sanctions, using the UAE and Hong Kong as offshore hubs to move money and buy and sell goods.

Why is it introducing new sanctions?

That the Trump administration is returning to economic pressure is an indicator that it no longer sees a military solution to its predicament.

Concerns about munitions stockpiles, souring public opinion, and limited military options have left the White House hesitant to return to open conflict.

The deadlock comes at a particularly sensitive time for Trump. Polls show that public support for the war and his presidency is continuing to erode just a few months ahead of the crucial midterm elections.

Will the sanctions work?

Trump officials have deployed a raft of superlatives to sell the measures, describing them variously as the "toughest sanctions in history" and the "greatest financial offensive ever".

Whether this turns out to be the case will depend on the responses from Iran's major economic partners, in particular China and the UAE.

The two countries are key to keeping Iran's battered economy afloat. Not only are they Iran's largest trading partners but both are crucial in enabling it to bypass existing US sanctions.

The UAE said last week that it was severing all trade and financial ties, depriving Iran of its third-largest export market and a major offshore hub for its shadow economy.

China, the largest buyer of Iranian oil, has responded less favourably. The Foreign Ministry said on Tuesday it opposed the measures and that it would "take all necessary measures" to defend its interests.

"Cooperation between China and Iran has always been conducted within the framework of international law and should not be interfered with or disrupted," a ministry spokesperson said.

How has Iran responded?

Hopes in Washington that the prospect of further economic pressure would convince Iran to give up its control over the Strait of Hormuz had been dashed even before Bessent's press conference.

Key Iranian officials had brushed off the threats and vowed to retaliate against countries that cooperate with the US.

The country's powerful national security chief Mohsen Rezaei warned that not "even a single drop of oil" would leave the region if the US doubled down on its economic war.

Similar messaging was reiterated on Tuesday by Iran's economy minister Ali Madanizadeh, who claimed the country is "fully prepared" for the sanctions and issued a fresh threat.

"Our defence is no longer so defensive. The enemies should wait for an attack," he said on state TV.

What hopes are there for a diplomatic outcome?

Regional mediators have continued efforts to revive peace talks after the 60-day ceasefire collapsed earlier this month.

Pakistan struck an optimistic note on Monday after high-level discussions in Tehran, which Interior Minister Mohsin Naqvi said had made "significant progress".

"The Iranian president candidly shared his government's perspective and we had a very constructive exchange on the issues involved," he wrote on X.

Iran has not yet commented on the talks.

Neither Iran nor the US have signalled willingness to return to the negotiating table since the Islamabad memorandum of understanding expired on 17 August.

Both countries have instead doubled down on their demands and threatened to escalate the war if the other does not concede.

The Strait of Hormuz remains the biggest sticking point. Iran is continuing to prevent ships from accessing the Gulf and insists it will retain control over the strategic waterway after the war. The US is demanding Tehran drop its claims over the strait and re-open it to maritime traffic.