U.S. Campaign on Iran’s Economy May Still Risk Regional Military Escalation

Facing a fresh economic blockault from the United States, Iran’s leaders are gambling that they can weather the coming storm and make the cost of their suffering felt in an oil-rich region that is critical to the global economy.

As Iran’s ever more devastating economic crisis deepens, experts warn, Iranian leaders may feel they have little to lose by responding to U.S. economic pressure with the kind of military escalation President Trump now seems keen to avoid.

“The danger is that ‘economic D-Day’ is being presented almost as a substitute for further war when it may instead become another mechanism for escalating it,” said Sina Toossi, an Iran expert at the Center for International Policy. “The harder Washington pushes third countries to sever Iran’s remaining lifelines, the stronger Tehran’s incentive becomes to demonstrate that participating in Iran’s isolation carries costs of its own.”

Treasury Secretary Scott Bessent on Monday announced a new package of U.S. measures to disrupt Iran’s economy, although he offered few details. The success of the U.S. efforts will also depend on how much the Trump administration can convince other countries to go along with its plan — especially critical trade partners for Iran, like Turkey, Russia, and China.

Still, as the Trump administration reached for military metaphors to convey the severity of its plans — calling them an “economic D-Day”— Iran responded in kind. Iranian officials have labeled the U.S. campaign the next phase of the war that Washington has waged since U.S.-Israeli strikes were launched in February.

Economic warfare is the “main battlefield” in the current confrontation, Iran’s Revolutionary Guards Corps was quoted as saying in a statement cited by Press TV, an Iranian state news outlet.

In statements broadcast after Mr. Bessent’s news conference, Iran’s minister of economy, Ali Madani Zadeh, warned of Iranian retaliation.

“The enemies intend to launch an economic terrorist attack on us, but we also have our own tools and know how to play the game,” he said, in comments carried by the semiofficial news agency, Tasnim.

A day before Mr. Bessent’s announcements, Iran’s top security chief, Mohsen Rezaei, vowed that “not a single drop” of oil would leave the region if its Gulf neighbors joined the U.S. effort, and that they would be considered enemy states.

The severity of the Iranian warnings also highlights just how bad Iran’s current economic crisis is — and it is worsening by the day.

A report on Monday by Iran’s most prominent economic newspaper, Donya-e-Eghtesad, said Iran’s rial has depreciated to new lows. It has plummeted by 41 percent since December, when the currency rate sparked protests that morphed into weeks of nationwide unrest. Iranian security forces responded with a deadly crackdown.

Inflation and unemployment have soared, with prices of everyday goods increasingly out of reach for many Iranians. At the same time, the U.S. strikes that damaged Iranian energy infrastructure and the ongoing U.S. naval blockade have intensified an ever-worsening fuel supply crisis — an issue that sparked mblockive protests in 2019.

But Iranian officials are projecting confidence that their leadership can survive because this new wave of U.S. sanctions looks similar to old ones. For decades, American leaders have vowed to devastate the Iranian economy through ever harsher sanctions that the Islamic Republic’s leaders have learned to withstand.

Iran’s leadership “has been planning to confront U.S. sanctions for a long time and is fully prepared for new sanctions,” Mr. Madani Zadeh, the economy minister, said late on Monday. He said the government had a two-year plan in place for dealing with such sanctions.

Iran’s ability to withstand the Trump administration’s economic pressure campaign will depend on the attitude of Iran’s key trading partners.

Mahdi Ghodsi, an economist at the Vienna Institute for International Economic Studies, said that “faced with sufficiently credible secondary-sanctions risks,” those trading partners may “prefer to protect their much more important financial and commercial interests with the United States and reduce the services they provide to Iranian entities.”

Some ***ysts also warn that the brunt of further economic pain is likely to be borne by ordinary Iranians, not Iran’s leaders.

Among the sectors Mr. Bessent identified as being targeted in the new U.S. campaign were gold, digital blockets, technology, aviation and shipping — sectors that Esfandyar Batmanghelidj, who heads the Bourse & Bazaar Foundation, a London-based think tank focused on Iran’s economy, called “lifelines for the Iranian people.”

“Digital blockets and gold are how ordinary Iranians protect their savings from inflation,” he wrote in a social media post. “Technology keeps Iranians connected with the world. Aviation keeps Iranian families connected with loved ones across borders. Shipping is how essential goods, including food and medicine, reach Iran.”

Sanam Mahoozi contributed reporting