US economic war on Iran escalates as Tehran pursues Oman-brokered Strait of Hormuz corridor

The Trump administration has launched its most aggressive financial offensive against Iran yet, announcing on 24 August what Treasury Secretary Scott Bessent called “Operation Economic Outcast” — a campaign to sever every remaining revenue stream of the Islamic Republic, including oil exports, while threatening secondary sanctions against any country or company that continues to do business with Tehran.

“Around the globe, our objective is to sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone,” Bessent said at a press conference, according to Al Jazeera. The move comes nearly six months into the US-Israel war on Iran, which began on 28 February, and marks a shift from military strikes to economic strangulation in an effort to force Iran to accept a peace deal.

The escalation, however, is unfolding alongside a parallel diplomatic track. On 25 August, Omani Foreign Minister Badr Albusaidi arrived in Tehran for talks with his Iranian counterpart Abbas Araghchi. The two discussed a “phased framework” for a temporary joint navigation corridor through the Strait of Hormuz and a joint mine-clearing project in the strategic waterway, according to a joint statement released after the meeting. The proposal is part of a June US-Iran memorandum of understanding aimed at ending the war, though its implementation remains uncertain.

Albusaidi said on X that he hoped the two countries would “soon announce” the temporary corridor, with a permanent solution to follow. The strait, through which about one-fifth of the world’s oil and gas is shipped in peacetime, has been effectively closed since Iran imposed a de facto blockade early in the conflict — a blockade that has driven up global energy prices and contributed to near-record petrol prices in the United States.

Domestic costs mount

The economic war is playing out against a backdrop of declining public support for the conflict at home. A Reuters/Ipsos poll released on 24 August found that only 31% of Americans now support US military action against Iran, down from 37% in March. Among Republicans, support fell to 69% from 77% over the same period, according to Al Jazeera. President Donald Trump’s approval rating remains at a record low of 33% for the second consecutive survey.

The war has also stretched US military resources. South Korea confirmed on 24 August that the United States cancelled the upcoming Ssangyong joint marine amphibious landing exercise scheduled for September, citing force constraints caused by the Iran war, Al Jazeera reported. The cancellation follows Trump’s order to scale back the annual Ulchi Freedom Shield exercises with Seoul from 11 days to five.

Gulf states in the crossfire

For Gulf Arab states, the new US economic campaign presents a dilemma. On one hand, tighter sanctions may appear preferable to another round of US-Israeli missile strikes that could draw Iran’s retaliation onto their territory. On the other, Iran’s Supreme National Security Council Secretary Mohsen Rezaei warned last week that if “any countries surrounding Iran join the Americans in their economic war, not a drop of oil will leave the Persian Gulf and the Strait of Hormuz,” as cited by Al Jazeera.

The US Treasury has already been enforcing a naval blockade: US Central Command said on 25 August that its forces have redirected 70 commercial vessels, disabled three, and boarded two as part of operations that could last indefinitely, according to Al Jazeera. Iran, meanwhile, has developed a sophisticated sanctions-evasion system involving shadow tanker fleets, ship-to-ship transfers, shell companies and barter mechanisms.

What the economic war means

Bessent’s “Operation Economic Outcast” targets banks, oil buyers and refiners, shipping companies, ports, exchange houses and potentially governments that facilitate Iranian trade. The administration has not yet specified which entities will be hit, but the threat of secondary sanctions — penalties against third-country firms — is designed to isolate Iran completely.

Analysts quoted by Al Jazeera caution that the measures are unlikely to change Iran’s behaviour, given that it is already one of the most sanctioned countries in the world. But the combination of military pressure, economic blockade and the ongoing Oman-mediated talks suggests Washington is trying to squeeze Tehran into a negotiated settlement before the war becomes even more unpopular at home.

The outcome of the Hormuz corridor discussions — and whether the temporary shipping lane can actually function under the current blockade — will be a key test of whether the June memorandum of understanding can hold.