After nearly six months of heightened tensions, the US has moved to escalate economic pressure on Iran, while President Donald Trump announced the deployment of ‘crushing economic warfare’ against the Islamic Republic, signaling a shift from military operations to economic isolation. According to TradingView, this shift has already impacted defense stocks like Leonardo DRS and Leidos, which fell by 3.7% and 3.6%, respectively, following the announcement.

Proposed 100% Tariffs on Countries Backing Iran

According to Der Spiegel, Trump has pushed for the inclusion of Iran in a new sanctions package targeting Russia. The measure, reportedly endorsed by the late Senator Lindsey Graham, would impose tariffs of up to 100% on countries that continue to buy Russian oil and gas. The initiative excludes nations buying less than 15% of Russian gas and those taking ‘significant steps’ to reduce such purchases, this move is part of a broader effort to isolate Iran economically, with the White House seeking to pressure Teheran into returning to negotiations.

Economic Shifts and Market Reactions

Market analysts have noted that the Trump administration’s pivot to economic pressure has reduced expectations for military escalation; As a result, defense contractors—previously seen as beneficiaries of a potential war,are now underperforming. According to TradingView, the 10-year Treasury yield has pushed past 4.7%, compounding the downward pressure on defense stocks. Traders have also reduced their bets on Federal Reserve rate hikes, with the CME FedWatch tool showing a 33.1% chance of a rate hike in September, down from 44% the previous week.

Meanwhile, the Canadian dollar has gained strength against the US dollar; USD/CAD fell for the third consecutive day, reaching 1.3870 during Asian trading hours; this movement was attributed to weaker-than-expected US retail sales data, with July figures showing a 0.6% drop month-over-month, below market expectations of a 0.1% increase. On an annual basis, retail sales rose 5.0% in July, down from 6.8% in June, according to the US Census Bureau.

Iran’s Response and Regional Concerns

Iran has warned that any country joining the US-led economic campaign will be treated as an enemy. This stance was outlined in a report by Al Jazeera, which cited government officials suggesting that fuel prices in Iran will be raised on the eve of new US sanctions. Iran’s government has also signaled its readiness for retaliation, with analysts warning that the conflict could spill into the broader Middle East region.

Earlier this month, tensions escalated over the strategic Strait of Hormuz, a critical artery for global oil shipments, the US and Iran have both increased military activity in the region, with each side issuing increasingly aggressive statements. According to Der Spiegel, the US is now conducting strikes in Iran, while Teheran has launched retaliatory attacks in the region — the situation remains volatile, with both sides escalating rhetoric and military presence.

Trump’s administration has framed this economic campaign as the most broad in history, urging allies to join in what it calls the ‘greatest coordinated economic isolation.’ However, critics question the effectiveness of such measures in the long term. According to Al Jazeera, talks to end the conflict have stalled, and it is unclear whether the new sanctions will achieve their stated goals or further inflame regional tensions.