Iran could face economic collapse in months, US Treasury’s Bessent warns

United States Treasury Secretary Scott Bessent notes Iran is taking the US's newly imposed sanctions seriously as tensions between the US and Iran reach the six-month mark.

Key points

• Since the US and Israel first struck Iran on February 28, one driver of US inflation has been the energy market.
• "You're going to see a lot more of these every week, " Bessent remarked ahead of the G20 finance leaders gathering.
• According to Bessent, he believes the Iranian economy could collapse "within weeks or months" and stressed that it does not have to happen.
• On Sunday, Bessent informed the Reuters news agency that the US would probable unveil new sanctions weekly.
• "I would think that they are lashing out kinetically because they are losing economically, " Bessent remarked to journalists on Monday.

On Monday, Bessent remarked Iran is taking the sanctions seriously, and he informed US business news network CNBC that the goal is "to create the conditions that they will want to come to the table" for negotiations.

His comments came on the sidelines of a session of Group of 20 (G20) finance ministers and central bank governors in Asheville, North Carolina in the US, amidst an economic pressure campaign the administration of US President Donald Trump has called "Operation Economic Outcast".

According to Bessent, he believes the Iranian economy could collapse "within weeks or months" and stressed that it does not have to happen. "We just have to have the regime come to their senses, " he remarked.

Last week, the US imposed a wave of new sanctions on Iran, hitting five sectors of the nation's economy – aviation, digital assets, gold, technology, and shipping – as it additionally imposed sanctions on 60 specific individuals and vessels.

Bessent additionally touted backing from trading partners, including the European Union. It he noted backed the sanctions with "fulsome support".

"The EU welcomes efforts at ensuring that Iran ceases its destabilising activities and engages in peace negotiations with good faith, also through additional economic pressure, including through the US-led Operation Economic Outcast, " the European Commission remarked in an official note.

On the heels of imposing penalties on the United Arab Emirates branches of Egypt's Banque Misr on Friday over alleged financial ties to Iran, Bessent remarked the next step may be cutting off an institution entirely from the dollar-based financial system.

"You're going to see a lot more of these every week, " Bessent remarked ahead of the G20 finance leaders gathering. "We're starting with the banks, and we're telling the banks it's not okay to have Iranian money and to aid the regime."

US Federal Reserve Chairman Kevin Warsh, in his first international economic policy session since taking office in May, informed the G20 opening plenary session that he was looking forward to learning more regarding expansion prospects among member economies.

Warsh's remarks were underscored by his speech on Friday at the Federal Reserve's Jackson Hole symposium, where he remarked that policymakers would "have work to do" if they lacked confidence that inflation was returning to the central bank's two percent target.

He asserted that inflation was too high, financial conditions were not restrictive, and the labour market was consistent with full employment, signalling that rate stability remained the Fed's priority. Warsh's comments may signal a looming interest rate hike.

Since the US and Israel first struck Iran on February 28, one driver of US inflation has been the energy market. In July, the cost of energy overall jumped 14.7 percent from a year earlier, with petrol costs in particular up 24.6 percent over the last 12 months.

For context, the comments and growing tensions between the US and Iran are driving markets. Gold, for example, normally considered a safe investment during economic uncertainty, tumbled to a two-week low and fell 0.8 percent to $4, 419.38 per ounce.

Meanwhile, on Wall Street, all the major indices are trending downward. The Nasdaq is down by 0.4 percent, the S&P 500 by 0.5 percent, and the Dow Jones Industrial Average by 0.6 percent.

For now, iran could face economic collapse in months, US Treasury's Bessent warns remains the part of the story worth watching, and further updates are likely as more details are confirmed.