Iran readies response plan as US threatens more economic sanctions

Amid trade embargoes, asset freezes, and attacks on vessels as part of a naval blockade campaign, Washington has announced plans to apply a new wave of restrictions on Iran, targeting the country's economy.

US Treasury Secretary Scott Bessent said last Thursday that Washington is planning to inflict further economic damage on Tehran within this week. The US will impose measures unprecedented in the history of economically isolating a nation, Bessent said.

A day later, President Donald Trump echoed Bessent's statement and said Iran would face a powerful economic blow. As the memorandum of understanding (MoU) expired on Monday, Trump called on Tehran to raise the white flag of surrender but stressed he is in no hurry to end the war.

Since February 2025, when Trump's second term began, Washington has imposed sanctions on more than 1,000 individuals, vessels, and aircraft linked to Iran, according to the US Treasury's Office of Foreign Assets Control (OFAC).

Iranian officials have maintained a defiant stance, saying they could shift to offensive operations while also being prepared to counter any ground invasion.

According to Mohammad Reza Farzanegan, professor of Middle East economics at Philipps-Universitat Marburg in Germany, the naval blockade creates a new situation where traditional sanctions packages combine with the use of military force to cause real goods shortages inside the Iranian economy.

“This is an additional burden that raises new questions for policymakers in Tehran: Should they accept a deal imposed by the Trump administration, or continue armed conflict to break the blockade on ports? For now, Iran appears to lean toward the second option,” he told Al Jazeera.

Farzanegan argued that for the US to achieve its goal of changing the Iranian government's behavior, Washington should also “open a diplomatic exit and offer this choice.” If armed conflict fully resumes, “the costs will not be limited to the sanctioned party; the global economy will also pay” through continued disruptions in the Strait of Hormuz and attacks across the region.

Iran stresses MoU commitments

Meanwhile, negotiations to find a way out of the war remain deadlocked, although Iran continues dialogue with Oman and other mediators about a potential interim deal in the Strait of Hormuz, which before the war saw a fifth of global oil and natural gas flows.

Iran's parliament speaker and chief negotiator, Mohammad Bagher Ghalibaf, told state media on Tuesday that the Strait of Hormuz will remain closed until the US meets the conditions of the expired MoU.

“I make it clear: Until the commitments the US made in the memorandum of understanding—including lifting the blockade, releasing frozen assets, removing oil sanctions, ending threats and military campaigns on all fronts, and other conditions the US agreed to in the deal—are fulfilled, the strait will not be reopened,” Ghalibaf said.

With tensions rising ahead of war, the Iranian government has authorized several border provinces to import essential goods and build stockpiles. To survive the blockade in recent months, Iran has focused on redirecting imports of food, consumer goods, and industrial raw materials through land borders with Pakistan, Turkey, and others, as well as via the Caspian Sea with Russia and Central Asia.

During a short ceasefire under the MoU, the blockade was lifted for a few weeks in late June and early July, allowing swift exports of crude oil stored on supertankers and giving the military time to regroup. But Iran's oil exports have since halted following the collapse of the deal, and US and Israeli officials have discussed disrupting Iran's domestic import operations to increase pressure.

Energy in the crosshairs

US media has reported that Washington's upcoming measures could include further sanctions on Chinese independent refineries (often called “teapots”) that buy or process Iranian crude. OFAC has already imposed secondary sanctions on smaller entities in China and Hong Kong handling Iranian oil money flows, but could go further by threatening to designate major Chinese banks if they touch Iran-related funds.

According to economist Ghodsi, energy remains the US's greatest leverage over Iran, especially after US and Israeli attacks damaged the country's infrastructure. The Iranian government has also reduced subsidized fuel quotas for private vehicles and is considering raising fuel prices, while multi-billion-dollar annual fuel imports have stopped due to the war and blockade.

Economist Ghodsi assessed that the US will target Iran's external energy trade, including shipping, transport services, insurance, payments, and intermediary buyers. “In practice, that means stricter enforcement against entities in China and elsewhere that facilitate sanctioned energy transactions, along with tighter monitoring of transshipment routes and payments through neighboring countries,” he said.