US threatens countries doing business with Iran, but holds off on penalties for now

The United States has announced the expansion of secondary sanctions that it can impose on entities and countries engaging in business with Iran as tensions with Tehran intensify. Treasury Secretary Scott Bessent unveiled the "economic D-Day" plan during a press conference, aiming to coerce countries into severing ties with Iran or face consequences including being cut off from the dollar-based financial system.

The US Treasury Department has mapped Iran's networks and financial channels for smuggling oil and evading sanctions, identifying five sectors - digital assets, technology, gold, aviation, and shipping - that Iran uses to sustain its economy. Nearly 60 entities, individuals, and vessels have been sanctioned. China, the largest buyer of Iranian oil, has been intensively targeted, but larger Chinese banks facilitating the oil trade remain un-designated.

The ongoing war with Iran, which has pushed global energy prices higher, is entering its sixth month with diplomatic efforts to end the conflict stalled. While heavy fighting has decreased, the Strait of Hormuz remains blocked, hindering oil and raw material shipping and maintaining elevated energy prices. The US has enforced sanctions against Iran for decades, primarily targeting its oil revenues, aviation sector, cryptocurrency, procurement of military hardware, and funding for enterprises controlled by the Islamic Revolutionary Guard Corps.

These sanctions bar designated entities from the dollar-based financial system; however, Iran has managed to swiftly establish new front companies and vessel registrations to circumvent these restrictions.