US Announces 'Toughest Sanctions in History' on Iran Amid Oil Market Turmoil
US Sanctions on Iran and Global Oil Market Impact
By Jana Choukeir and Susan Heavey
Background and Recent Developments
DUBAI/WASHINGTON, Aug 21 (Reuters) - U.S. Treasury chief Scott Bessent said the United States will impose "the toughest sanctions in history" on Iran, a move he suggested would lessen the need for new major military operations.
Bessent's comments on Thursday followed President Donald Trump's threat a day earlier of "Economic Warfare" and warning of economic consequences against any country that provided "any type of lifeline to Iran." Bessent promised details next week.
Oil Market Response
Oil prices rose to more than a three-week high on Thursday following those U.S. threats of financial penalties aimed at forcing an end to a nearly six-month-old war that has stranded millions of barrels of Middle Eastern oil.
"I'm not sure why oil has popped up on this," Bessent told CNBC. "If we are doing the maximum economic pressure, then that means that likely there will not be a large-scale kinetic restart," he said, using a term referring to military force.
Regional Conflict and Shipping Disruptions
Thousands have been killed in the conflict, which drew in Gulf nations and shocked markets as Iran flexed its ability to curb shipping through the Strait of Hormuz — a waterway that carried about a fifth of all traded oil before February.
The U.S. and Iran have twice announced ceasefire deals, in April and June, aiming to restore the free flow of shipping through Hormuz on a path towards ending the conflict, but both quickly crumbled.
Details and Reactions to Sanctions
Sanctions Detail to Come
Iran has weathered near-continuous, punishing economic sanctions for nearly 50 years, since the Islamic Revolution of 1979.
Before Bessent spoke, Iran's foreign ministry said it condemned U.S. economic and trade sanctions, calling them "economic terrorism" that would not "create even the slightest hesitation in Iranians’ determination to safeguard Iran’s independence, dignity and national sovereignty."
Bessent told CNBC he would share more details on the latest package and "talk about exactly what we're going to do" on Iran at a press conference on Monday.
"It is a one-two punch. We have the blockade (on Iran), and we are going to have the toughest sanctions in history," he added, referring to a U.S. naval blockade imposed on Iran in April and paused for a month in mid-June.
"It is going to work in Iran and we are going to collapse this regime. It is time for our allies and the rest of the world to make a decision," he said.
China's Role and International Risks
China buys more than 80% of Iran's shipped oil, according to 2025 data from analytics firm Kpler, but engaging in further economic warfare with China, a major exporter to the U.S. including vital rare-earth minerals, risks retaliation against Washington.
When asked if the United States could target China for doing business with Iran, Bessent said many conversations were best to have in private.
"Keep in mind that the Chinese get 50% (of their) energy... from the Gulf. So it would do them a big service to get with the program," he said.
China's embassy in Washington said "sanctions and pressure do not help resolve the problem."
"China calls on the relevant parties to take responsible actions and resolve the issue through political and diplomatic means," according to an embassy spokesperson.
Political and Economic Consequences
'Tremendous Economic Consequences'
In a social media message on Wednesday, Trump promised "Economic Warfare and Isolation on an unprecedented scale." He did not say what specific steps the U.S. would take or name any country, though the warning would appear to extend to U.S. allies that have helped mediate peace talks.
"ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences," Trump wrote.
Domestic Pressures and Iranian Response
Trump, however, is under pressure at home to end the unpopular war, with high fuel prices dragging down his approval ratings and potentially threatening his party's control of Congress in midterm elections in November.
Iranian Foreign Minister Abbas Araqchi called Trump's comments an attempt to divert American public opinion from domestic financial problems, including record debt and rising interest rates.
He said Washington's insistence on policies he described as failed would bring further failures and alienate Iranians.
Trump's social media threats and announcements are not always implemented as written.
(Reporting by Jana Choukeir in Dubai, Susan Heavey in Washington and Reuters bureaux; Writing by Alex Richardson, Andrew Heavens and Costas Pitas; Editing by Lincoln Feast)
