US Threatens 'Economic D-Day' Against Iran
US Treasury Secretary Scott Bessent has declared an "economic D-Day" against Iran, vowing to sever all economic ties with the country and isolate any nation that continues to partner with Tehran financially. In an opinion piece for the Financial Times, Bessent wrote that the objective is to "sever every economic lifeline that sustains the tyrannical regime until Tehran stands alone."
Bessent described the campaign as "the single greatest financial offensive ever" and said it was part of the final phase of the US-Israel war with Iran, which he claimed was "entering its endgame." He was expected to provide further details at a press conference in Washington at 1pm local time on Monday, after the article was published.
The announcement follows a series of threats and policy shifts from the Trump administration. In April, President Donald Trump warned that "a whole civilisation will die tonight" unless Iran agreed to end the war and unblock the Strait of Hormuz. The US later backed away from that position after Pakistan intervened as a mediator and called for greater diplomacy.
In his remarks, Bessent also said that any country continuing to enable Iran would become a "global pariah." On social media platform X, he claimed the US had "dismantled Iran's military capabilities, destroyed nearly 100% of its military factories, and buried its nuclear programme."
Iran Responds
Iran dismissed Bessent's comments. According to Reuters, Tehran said it would shut down all oil exports from the region "if the war continues" and issued a new warning to shipping not to pass through the Strait of Hormuz without its permission.
The Strait of Hormuz, a waterway south of Iran, is a critical artery for global oil and gas supplies—roughly one-fifth of the world's oil and gas typically passes through it. However, the flow has been effectively blocked since the conflict began at the end of February, according to reports.
Iranian Deputy Foreign Minister Kazem Gharibabadi responded to Bessent's X post, writing that the US "narrative doesn't add up."
Meanwhile, Iran's Central Bank governor Abdolnaser Hemmati sought to downplay the economic impact of the war and US pressure. Speaking on state TV, he described the sharp depreciation of the Iranian rial as "temporary" and blamed "American political propaganda" for the currency's woes. The rial has lost nearly 10% of its value in two weeks, trading at over 2 million to the dollar on the black market, down from around 1.7 million before the war.
Market Reaction
Despite the tough rhetoric, oil prices edged lower on Monday. Brent crude for October delivery traded at $92.74 a barrel, down from $93.53 late Friday. Investors appeared to take some comfort from the shift in US tactics from military strikes to economic sanctions.
"The US is changing tactics in its battle against Iran," said Susannah Streeter, chief investment strategist at Wealth Club. "There may be some relief that the threats have moved from military strikes to some form of super sanctions."
London's FTSE 100 outperformed European peers, closing up 37.76 points, or 0.4%, at 10,854.32. The FTSE 250 ended slightly lower at 24,717.48, while the AIM All-Share rose 2.08 points, or 0.3%, to 814.04.
On Wall Street, stocks were mixed: the Dow Jones Industrial Average gained 0.3%, the S&P 500 fell 0.3%, and the Nasdaq Composite dropped 0.6%. In Europe, the CAC 40 in Paris closed down 0.4%, and the DAX 40 in Frankfurt shed 0.1%.
Currency markets showed little change, with the pound trading at $1.3639 and the euro at $1.1669. The US 10-year Treasury yield narrowed to 4.7%, while the 30-year yield fell to 5.23%.
Gold, often seen as a safe haven, rose to $4,670.28 an ounce, up from $4,605.34 on Friday.
Oil Prices and Consumer Impact
Higher oil prices have stoked concerns about the cost of living, with petrol and diesel prices significantly higher than a year ago. In the US, gasoline prices have surpassed $4 a gallon, making affordability a top concern for voters ahead of the November midterm elections.
Last week, Bessent announced that the US government would intervene in bond markets and buy back more government debt, but the impact was short-lived.
The escalation comes after a long history of tensions between Washington and Tehran. The 2015 Obama-era deal lifted many sanctions in return for Iran limiting its nuclear programme. Trump pulled the US out of the deal in 2018, calling it "defective at its core," and reimposed all US sanctions. During Joe Biden's presidency, attempts to reinstate the deal did not succeed.
This year, the Trump administration launched a wave of sanctions on foreign banks and firms doing business with Tehran, and the latest measures are expected to be unveiled imminently.