The Trump administration has unveiled a new strategy to pressure Iran, dubbed Operation Economic Outcast by US Treasury Secretary Scott Bessent. The plan aims to cut Iran off from the global economy by threatening foreign governments, banks and companies with sanctions if they continue doing business with Tehran.
Iran's economy is already under severe strain from years of sanctions, war and a months-long US naval blockade. Iranian officials acknowledge that oil exports and access to foreign currency have been severely constrained. Ordinary Iranians are enduring high inflation, currency depreciation and worsening living standards, and further economic strangulation will inflict significant additional hardship.
Iran's strategy: bargaining with endurance
Iran wants an end to the war, with President Masoud Pezeshkian saying it should seek peace while it can still negotiate from a position of "power and dignity". However, Iran needing a deal is not the same as Iran preparing to surrender, a distinction that has repeatedly eluded Trump in formulating his Iran policy.
Iranian officials increasingly suggest the strategy has the opposite effect to what was intended. Each successive escalation demonstrates why Iran relinquishing its remaining leverage would leave it vulnerable to the next round of US pressure. The emerging strategy appears to combine bargaining with endurance: seeking an agreement while demonstrating it can withstand pressure without capitulating or abandoning its core terms.
Threats to Gulf oil routes and US interests
Mohsen Rezaei, head of Iran's supreme national security council, has called participation in Washington's economic campaign an "act of war". He says Tehran will first try to persuade neighbouring states not to participate, but has threatened their interests if they do. He has warned that Iran could prevent Gulf oil exports through routes designed to bypass Hormuz.
These statements reflect a consistent strategic logic: Iran cannot defeat the US economically, but it can try to make the economic strangulation of Iran prohibitively expensive for Washington and the countries needed to enforce it. This could mean tightening pressure on Hormuz, threatening infrastructure enabling alternative oil-export routes, or increasing pressure on US interests across the region. Escalation would compound the suffering of ordinary Iranians, but that is why Washington should think beyond the first-order effects of its own actions.
China's resistance and the risk of escalation
For Bessent's threat to work, Washington must persuade or coerce much of the world into participating, especially China, the principal buyer of Iranian oil. Yet Beijing is moving in the opposite direction. It has ordered firms not to comply with US sanctions targeting Chinese buyers of Iranian oil, while its top court highlighted a ruling penalising a Singaporean company for complying with US sanctions. Beijing has warned it will take "all necessary measures" if Chinese interests are targeted.
Washington faces an uncomfortable choice: tolerate continued trade between Iran and China, its neighbours and other partners, or dramatically escalate coercion of the governments, banks and companies that keep those channels open. That risks multiplying the US's economic confrontations at a moment when it needs international cooperation to isolate Tehran. Bessent acknowledged the danger when asked why Washington was not immediately imposing its most sweeping secondary sanctions: "Why would I want to blow up the global financial system?"
With the midterms approaching, the White House has strong incentives to avoid another major escalation that could disrupt Gulf energy flows and send fuel prices soaring. Tehran knows this. Its gamble is that it can endure and reroute enough commerce while imposing enough costs that Washington and its partners eventually prefer a settlement to continued confrontation.
This is a dangerous contest of endurance. Washington is betting Iran's economy completely breaks first. Tehran is betting the US's tolerance for the war and its mounting economic costs breaks first. This has been the recurring flaw in Trump's approach. In 2018, he left the 2015 nuclear deal, and Iran expanded its nuclear programme. Military conflict was supposed to force Tehran to accept US terms, but instead the war expanded and Hormuz became a central source of Iranian leverage. Now intensified economic strangulation is supposed to accomplish what military power could not.
Unless Trump starts thinking several moves ahead, his latest attempt to force Iran into submission could leave the US with even higher energy prices, an even more confrontational adversary and yet another escalation it never counted on.
