August 24, 2026

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Iran and the Region Respond to U.S. “Economic D-Day”

(AP Photo/Anmar Khalil)

U.S. Treasury Secretary Scott Bessent is expected to unveil the details of new U.S. sanctions that President Trump has characterized as an “Economic D-Day” against Iran, referring to the 1944 Allied landing in Normandy. Trump has characterized the U.S. sanctions package as a “crushing” operation to “cripple” Iran economically. According to Trump and other U.S. officials, the sanctions package will shut foreign companies out of the U.S. market if they continue to transact any business with Iran. The new measures will add pressure to Iran’s economy that is already under more strain than at any time, suffering from the combined effects of wartime destruction, the ongoing U.S naval blockade of Iranian ports, and the cumulative effects of decades of existing U.S. sanctions. But current U.S. sanctions have already shut Iranian banks out of the global financial system and limited customers for Iran’s oil and other products, making it unclear to what extent the new U.S. measures will add meaningful pressure on the regime. Aside from the new U.S. measures, energy industry experts — and some Iranian officials — accept that the U.S. Navy is demonstrating increasing success escorting commercial tankers through the Strait of Hormuz. The naval operation is eroding Tehran’s leverage over the waterway, but energy exports through the Strait are still well below pre-war levels and remain vulnerable to Iranian escalation.

The new U.S. measures will confirm a shift toward reliance on economic pressure rather than kinetic military action to coerce Iran into returning to the June Memorandum of Understanding (MOU), which sought but failed to end the war. The MOU collapsed in early July over Iranian perceptions that the U.S. had not implemented all of its MOU commitments, prompting regime hardliners to insist Iran militarily maintain its closure of the Strait of Hormuz. Explaining the policy shift, Secretary Bessent told journalists Thursday: “If we are doing the maximum economic pressure, then that means that likely there will not be a large-scale kinetic restart…But I would emphasize, that is for now.” Even before the details of the U.S. plan were released, Iran’s Ministry of Foreign Affairs condemned the U.S. plan as “economic terrorism.”

U.S. officials assess the measures to be announced today, when added to the ongoing naval blockade of Iran’s ports, will coerce the regime to immediately agree to open the Strait of Hormuz and return to negotiations. However, many experts doubt that Iran’s regime, which has withstood two decades of sanctions-centric “maximum pressure” policies, will buckle under new economic measures. Iran’s most important financial lifeline is China, which buys 90 percent of Iran’s oil, although the naval blockade has brought those exports to a standstill. Analysts agree the Trump team is likely to calibrate its use of the new measures against China, particularly in advance of the visit of China’s paramount leader, Xi Jinping, to Washington on September 24. To date, the U.S. Treasury Department has sanctioned independent Chinese refiners but has avoided the steps that would most antagonize Beijing, particularly penalizing major Chinese banks that finance that trade, including the People’s Bank of China (PBoC). China’s Ministry of Foreign Affairs spokesman Lin Jian expressed Beijing’s opposition to the planned U.S. announcement, stating: “sanctions and pressure will not help resolve the issue,” and urging all parties to “take responsible measures and resolve the problem through political and diplomatic means.”

Although Beijing openly opposes the new U.S. measures, Washington has obtained some cooperation from the United Arab Emirates (UAE). The emirate of Dubai, the commercial hub of the UAE, which has a large Iranian and Iran-origin population, is the main source of Iran’s imports from the West. U.S. authorities consider goods re-exported from the UAE to Iran to be Emirati goods, not subject to the ban on direct U.S.-Iran trade. The UAE has been subjected to more Iranian missile and drone attacks during the war than almost any other regional state, and UAE leaders have advocated confronting Iran rather than capitulating to its demands. But even at the height of the war, UAE companies continued their broad range of engagement with Iran. And UAE banks still served essentially as Iran’s “offshore banking system” — a role that has led the U.S. to impose sanctions on some UAE financial institutions in recent years. On Wednesday, in support of U.S. strategy, the UAE suspended all trade with Iran, announcing the move after UAE authorities claimed Iran had launched several ballistic missiles on the country. Iran denied firing on the UAE, and there was no independent corroboration of the claim, but in recent weeks Iran has attacked UAE ships transiting the Strait under U.S. protection. Experts assess that Iranian and UAE companies will circumvent the new UAE-Iran trade restrictions, taking advantage of lax enforcement and informal trade and finance mechanisms developed over decades.

The U.S. decision to amplify economic pressure on Iran raises questions not only about the strategy’s efficacy, but whether it might trigger a significant Iranian military response. Although they appear unified in the view that U.S. economic pressure constitutes an existential threat to the regime’s survival, senior leaders differ on how to respond to the U.S. strategy. Statements by key Iranian elected leaders last week reflect popular pressure within Iran for an end to the conflict, even if doing so requires the regime to draw back from its maximal demands. Moderate senior figures argue that deteriorating economic conditions could fuel regime-threatening unrest, if not soon alleviated by relief from U.S. sanctions.

On Friday, President Masoud Pezeshkian openly called for an end to the war, stating “It is better that we bring the war to an end now as we are in a position of power and dignity…The whole world acknowledges our victory and emphasizes that America has attacked our schools, hospitals and infrastructure in violation of all regulations and is hated around the world.” The same day, another elected leader, Majles (parliament) Speaker Mohammad Baqr Ghalibaf, who has close ties to hardline IRGC senior leaders and is far more influential than Pezeshkian, seconded the call for compromise. He stated: “No matter how much military power we have, if our people are struggling and the country lacks financial circulation and economic growth, we will not achieve progress…As someone who has experienced war, we understand the true value of peace.” Suggesting that the message advanced by moderate leaders might be resonating internally, Iran has reportedly begun re-engaging with regional mediators from Pakistan, Oman, Qatar, and Egypt to explore a possible return to talks with the Trump team. Pakistan’s Army Chief of Staff Asim Munir, a mediator trusted by both sides, is scheduled to visit Tehran today, reportedly to try to organize new U.S.-Iran talks and restoration of the MOU.

Harder-line leaders, including Secretary General of the Supreme National Security Committee (SNSC) Mohsen Reza’i, an IRGC stalwart, and current IRGC commander Ahmad Vahidi, argue that only escalation, not compromise, will deter further assaults by Washington. This hardline camp spans many institutions beyond the IRGC, including the Majles and the office of Supreme Leader Mojtaba Khamenei, who still has not appeared publicly. Hardliner opposition to an unconditional return to the terms of the June MOU comes a few weeks after IRGC leaders indicated they are shifting to an "offensive doctrine" in which Iran might attack key targets pre-emptively and not wait to respond to any U.S. escalation. Last week, Reza’i threatened to renew Iranian attacks on key energy targets in the Gulf states in order to compel the U.S. to accept Iranian control of the Strait and to reposition its large force away from Iran. The hardliners reportedly assess that Trump will accept Iranian conditions rather than restart the combat that has proved unpopular in the United States. One expert, Danny Citrinowicz, the former head of the Iran division of Israeli defense intelligence, told journalists: “…despite the signals coming from Ghalibaf and Pezeshkian, the probability of escalation is currently increasing rather than decreasing.”

Other hardliners argue not for military escalation but for adjusting Iran’s economic strategy. On Thursday, Shamseddin Hosseini, chairman of the Majles economic commission, said it was important for Iran to reduce its reliance on its southern ports, where the U.S. blockade is in place, and to expand trade routes across the northeastern land border, according to Iranian state media. It is not clear whether alternative concepts such as this will prevail in the intensifying debate in Tehran over how to respond to U.S. pressure.