US Administration Prepares Unprecedented Economic Squeeze and Naval Blockade Against Iran

Senior Trump administration officials are signalling that the US is preparing to push Iran's economy to its limits, as Washington turns increasingly to financial pressure and its naval blockade to force Tehran to reopen the Strait of Hormuz. Treasury Secretary Scott Bessent said on Thursday that the US would announce measures next week that would amount to economic isolation.

“It will be a combination of economic isolation like the world has never seen before, and the continued blockade in the Strait of Hormuz that will keep anything from going in or out of the Iranian ports,” Mr Bessent told Newsmax.

US Energy Secretary Chris Wright also said Iran's strategy would ultimately lead to the collapse of its government as its economy was “strangled”. Speaking to Fox News on Thursday, Mr Wright said Iran had “one card” left in the Strait of Hormuz “and it's shrinking in size”. He also said the ability of the US to escort products through the waterway was growing.

The renewed emphasis on economic pain marks a US shift towards squeezing Tehran financially after nearly six months of war, rather than immediately escalating its military campaign. US President Donald Trump is doubling down on using economic pressure on Iran to reopen the Strait of Hormuz, but the remaining levers at his disposal carry a set of risks. Iran remains the second-most sanctioned country on the planet, with more than 6,000 sanctions issued against its financial, energy and petrochemical, aviation and cryptocurrency sectors.

Leading economic indicators in Iran are flashing red: figures from the central bank showed inflation accelerated at a 53.9 per cent pace from April 20 to May 20, compared to 36.8 per cent over the same time last year. The International Monetary Fund expects a contraction of 6 per cent this year, and the rial recently sank to an all-time low against the dollar.

“Economic Fury has left the regime desperate for cash. Iran's economy is in free fall, inflation has skyrocketed, and the regime's ability to pay its troops has been decimated,” a Treasury representative said.

Foreign Ministry spokesman Esmaeil Baghaei wrote on X on Monday: “Iran has demonstrated over decades that it will not be strangled by these exhausted refrains.”

Ryan Bohl, a senior Middle East and North Africa analyst at the Rane Network, noted that viable economic levers left for the US are limited. Due to its isolation, Iran relies on a shadow banking system involving exchange houses and foreign companies to evade sanctions, launder money, and fund proxy groups and military programmes. The US Treasury clamped down on this system last week, targeting crypto exchanges and clandestine currency networks.

Rachel Ziemba, founder of Ziemba Insights, questioned whether new designations would have a meaningful effect given the regime's ability to circumvent sanctions. Additional measures could include actions under Section 311 of the Patriot Act or the Lindsey Graham Act, though the latter might drive up energy prices.

The naval blockade has drastically reduced Iran's oil exports, falling from 2.7 million bpd in February to 502,000 bpd in May, and averaging less than 500,000 over the past month. Research from the Foundation for Defence of Democracies estimates the blockade has cost Iran $435 million in economic activity each day, cutting off key purchaser China, which takes in about 90 per cent of Iran's oil exports.

As US President Donald Trump prepares to host Chinese President Xi Jinping next month, secondary sanctions and further measures risk alienating key partners and inflaming tensions with Beijing, adding another point of friction to the bilateral relationship.