Iran gambles it can outlast Trump’s 'Economic D-Day'

US President Donald Trump is gearing up for a new chapter in his ongoing battle against Iran, threatening even harsher sanctions and economic isolation to compel Tehran to negotiate a deal. However, this approach poses a significant risk for Gulf states, as Iran may respond not by yielding, but by striking the region's energy infrastructure and alternate oil supply routes.

The warning was issued by Mohsen Rezaei, the recently appointed head of Iran's Supreme National Security Council, who threatened a "seismic" retaliation against neighboring nations that join what he called the US "economic war." In addition, Rezaei warned that US commercial and economic interests in the area could be targeted if Washington imposes additional sanctions.

The threat arises as Trump has frequently claimed that the Strait of Hormuz is essentially US territory, asserting Washington's control of the waterway via naval blockade and even suggesting the possibility of formally declaring it American soil. These statements have heightened concerns among Gulf states who are already caught between the economic pressure campaign by Washington and Iran's capacity to disrupt regional trade.

Trump's strategy aims to achieve economic pressure where months of military action have been unsuccessful - to force Iran to accept Washington's terms. According to analysis by the South China Morning Post, the next phase may involve sanctions targeting countries and businesses that continue to trade with Tehran, potentially impacting major trading powers such as China, India, Turkey, and the United Arab Emirates.

However, such pressure could have serious repercussions for the Gulf. Iran has previously demonstrated its capability to employ drones and missiles against US bases and civilian infrastructure throughout the region, putting oil facilities, ports, power plants, and other critical infrastructure at risk.

The Strait of Hormuz is particularly crucial, as it transports approximately one-fifth of global oil supplies before the war. With Iran holding leverage over the strait, Gulf producers have a strong incentive to fear any strategy that could trigger a conflict with Tehran. Moreover, US economic pressure is occurring at a time when Iran is grappling with severe financial difficulties.

Oil exports have reportedly been essentially halted by the blockade, while inflation has soared above 80%, and the rial has continued to lose value. The International Monetary Fund has predicted a 6.1% contraction in Iran's economy this year.

Despite the economic hardship, Iran has not yielded to the pressure. Iranian President Masoud Pezeshkian has argued that Tehran must break free from the current "neither war nor peace" scenario and has defended a June memorandum with Washington as a potential path towards a settlement.