The U.S. is about to get much tougher with Iran, and Tehran is promising to hit back.
Treasury Secretary Scott Bessent said in a Sunday evening post that the U.S. will launch what he called its largest-ever financial action against Iran on Monday. The move expands existing sanctions on Iran's banking, energy, aviation, and cryptocurrency industries.
Both sides let a 60-day ceasefire window, which expired August 23-24, pass without a deal. The formal truce process aimed at stopping the Middle East conflict, which has lasted about six months, is now over.
Bessent posted on X Sunday evening that an economic offensive was beginning, comparing it to a military campaign and calling it the final phase of U.S. pressure on Iran. He wrote, "at dawn begins an economic D-Day."
The Treasury secretary warned that "any nation that serves as a financial artery of a withering regime should expect to share in its isolation." He added that "Iran's enablers purchase and transport its petroleum. They facilitate the flow of its finances through exchange houses and free trade zones."
Iran is not backing down. The country's state-controlled Persian Gulf Strait Authority said ships that break its transit rules could face "fines, seizure, or confiscation" on future trips.
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Mohsen Rezaei, who became secretary of Iran's Supreme National Security Council this month, warned that oil-rich neighbors who side with the U.S. would be treated as enemies. "Any country that becomes a partner in expressing economic restrictions against us will be regarded by us as an enemy," he said.
Iran's parliament also passed a measure mandating that vessels transiting the Strait of Hormuz pay for Iranian services, although the bill has yet to secure the complete endorsement of the legislative body.
The pressure is clearly showing. On Sunday, the Iranian rial fell to a new record low, with the dollar exceeding 2 million rials on the open market. The Trump administration says Iran's economy is collapsing under high inflation and a weakening currency.
In a Financial Times piece on Sunday, Bessent laid out how Iran's supporters keep the regime afloat. "They welcome Iran's flights and maintain registries on its behalf," he wrote. "They turn a blind eye to seaborne fuel transfers and the illicit use of their banks, all while concealing the extent of their complicity."
Oil prices actually dropped in Asian trading Monday. West Texas Intermediate slid approximately 1.3% to $85.93 per barrel, while Brent crude eased 1.3% to $93.22 per barrel.
That might seem odd, since the Strait of Hormuz carries about one-fifth of global seaborne oil. However, the UK Maritime Trade Operations agency said it had not verified any attacks in the waterway over the past two days, though it cautioned about potential hazards from floating or unmapped mines.
Omani Foreign Minister Sayyid Badr Albusaidi is set to visit Tehran on Tuesday for talks, which could signal a possible off-ramp.
For your portfolio, the key number to watch is oil. If tankers keep moving through the strait, gas prices stay stable and markets can look past the headlines. If they stop, all bets are off.
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