Iranian officials finalized a preferential trade agreement with Oman on Friday, marking the latest move in Tehran’s push to build regional economic ties as Washington shifts its focus toward an intensified sanctions campaign nearly six months into the war.
The push comes as the United States prepares what President Trump described as an “economic D-Day” against the Islamic Republic. Treasury Secretary Scott Bessent pledged to “collapse” the Iranian government through the “toughest sanctions in history,” while Vice President JD Vance stated Thursday that “the most effective tool that we have is the economic pressure that we can apply.”
In response, Iranian leaders have sought to mobilize neighboring economies to circumvent Western restrictions.
Speaking to Iranian and Iraqi business leaders in Baghdad, Iran’s parliament speaker told attendees they are “now the soldiers and commanders of this battlefield” against “unjust sanctions.” Iranian Foreign Minister Abbas Araghchi dismissed the threats on X, pointing to previous U.S. sanctions campaigns and writing, “We have seen this movie before. Same bull. Different bullies.”
Financial analysts note that the impact of Washington’s measures may largely hinge on the United Arab Emirates. Dubai remains a primary hub for Iranian currency flows and oil revenue transactions, with former U.S. Treasury official Miad Maleki stating that “about 80% of Iran’s foreign currency exchange is done in Dubai.”
Domestically, Iranian officials gave differing assessments of the war’s impact. Deputy Defense Minister Brig. Gen. Shahrukh Shahram claimed weapons production had continued and even increased, asserting that defense networks had adapted after initial strikes. In contrast, U.S. Central Command previously testified that allied strikes had degraded over 85% of Iran’s missile, drone, and naval infrastructure. Iranian President Masoud Pezeshkian acknowledged mounting domestic economic strain caused by the U.S. naval blockade and sanctions, noting that “it is better to end the war today, while we are strong and honored,” while questioning the sustainability of state fuel subsidies amid inflation.
The economic fallout continues to ripple across the wider region. An assessment by the U.K. Navy’s Maritime Trade Operations center revealed that commercial traffic through the vital Strait of Hormuz has dropped to roughly 4% of its pre-war average, with only 39 total transits recorded in the first week of August. In Lebanon, where cross-border fighting between Israel and Hezbollah persists, the World Bank projected that the country’s economy will contract by 6.4% in 2026 due to the collapse of tourism, severed supply chains, and mass displacement.
Security incidents were also reported on Friday along multiple fronts. The Israel Defense Forces confirmed an airstrike in southern Lebanon targeting suspects who entered an occupied security zone, while Iranian border guards in Sistan and Baluchestan province reported killing an armed militant during a foiled border infiltration attempt near Pakistan.
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