Trump Sanctions Pivot Signals Longer Iran Conflict, Oil Risks

President Donald Trump is betting that a renewed financial squeeze on Iran can end a war that months of bombing have not stopped. The shift came Monday as Trump argued Iran is "broke" and on the verge of economic collapse, even as his own administration has struggled to articulate clear war goals.

Crude oil futures climbed on the news. Investors read Trump's comments as a sign the Strait of Hormuz will stay partly closed, limiting global supplies of gasoline, jet fuel and natural gas. The waterway handles roughly 20% of global oil shipments. Attempts to reopen it have failed repeatedly, with Iran using the strait as leverage in talks.

Trump did not specify what new sanctions he would apply. The administration has been running "Operation Economic Fury" since April 16, targeting countries that buy Iranian oil or bank with Tehran. Treasury Secretary Scott Bessent called it the "financial equivalent" of a bombing campaign.

But economic pressure takes time to bite, said Richard Nephew, a senior research scholar at Columbia University who helped direct Iran sanctions strategy under President Barack Obama. Nephew said Trump has not defined what victory looks like, shifting between demands on nuclear weapons, the strait, and ballistic missiles.

"Economic pressure is a possible element in his strategy, but he's yet to explain the purpose," Nephew said. He argued Trump has weakened his own hand through "inadequate use of force, inarticulate elucidation of an objective, and vacillation on negotiations."

Iran's foreign ministry dismissed the threat. Spokesman Esmaeil Baqaei said on social media that Washington retreats into sanctions when diplomacy fails, then increases the dose when sanctions fail. "The real risk is that American politicians, clinging to this bad habit, will instead strangle their own remaining chances of a less humiliating exit," Baqaei wrote.

The Iranian economy is under severe strain. The International Monetary Fund estimates the economy will shrink 5.4% this year. The Iranian government reported annual inflation of 88.6%. The U.S. Treasury said average Iranian oil loadings have fallen from 1.8 million barrels per day before the war to less than 500,000 barrels per day over the past month.

Still, sanctions are a slow tool compared with a closed strait, Nephew said. Juan Zarate, a deputy national security adviser in the George W. Bush administration, said the U.S. has leverage through sanctions on third countries doing business with Iran. "The ultimate question will be how far the United States is willing to go to constrict Iran's oil trade and threaten third countries with severe sanctions – and whether it has the patience to test whether the economic pain will change the regime's behavior," Zarate said.

The pivot marks a reversal for Trump, who long derailed past presidents for using sanctions that failed to stop Iran's nuclear program. In a speech last week in Las Vegas, he defended the bombing campaign that began Feb. 28 by saying 50 years of sanctions had not worked.

"It's been 47 years, but really, it's been 50 years because they've been saying 47 for three years, it's been 50 years," Trump said. "And no other president has done what you should have done a long time ago, because Iran cannot have a nuclear weapon, can't have it."

The U.S. economy has kept growing, but inflation is elevated and borrowing costs have risen, hurting Trump's popularity. A senior U.S. official, speaking on condition of anonymity, said the military has set back Iran's ability to produce and ship oil. The administration sees the naval blockade and sanctions as effective and believes Trump has more options to tighten pressure in the weeks ahead.

Defense Secretary Pete Hegseth said Monday the U.S. can use its economic power alongside its military. "When you've got a motivated treasury secretary who can pull a lot of levers because he knows how to do it, you can put a lot of pressure on adversaries," Hegseth said in a joint appearance with Bessent.