US Escalates Economic Pressure on Iran as War Drags On, While Bessent’s Bond Market Moves Draw Skepticism

The Trump administration has launched a major new sanctions push against Iran, dubbed by officials as an “economic D-Day” and part of what Treasury Secretary Scott Bessent calls “Operation Economic Outcast,” aimed at cutting off the economic lifelines sustaining Tehran nearly six months into the US-Israel war with Iran. At the same time, Bessent’s separate effort to hold down US Treasury bond yields through buybacks and currency intervention is facing pointed criticism from prominent investors, including his own former mentor, Stanley Druckenmiller, who argue the approach papers over a deeper fiscal problem.

What is Operation Economic Outcast meant to do?

Bessent announced the sanctions campaign, describing it as an effort “to sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone,” according to NPR. Nations that keep trading with Iran have been warned they will “share in the isolation of a withering regime.” The campaign comes after a 60-day ceasefire deadline lapsed without ending the conflict, and after the war’s primary objective shifted — first from curbing Iran’s nuclear program, to regime change, and now to prying control of the Strait of Hormuz away from Iran, per NPR. Forbes interviews with Max Meizlish of the Foundation for Defense of Democracies and Dr. Rosemary Kelanic of Defense Priorities reflect the debate among analysts over whether such economic warfare, or alternative arrangements over the Strait, can actually end the conflict.

Will sanctions actually work this time?

Skepticism runs deep. NPR quotes Esfandyar Batmanghelidj of the Bourse & Bazaar Foundation, who notes that “maximum pressure tends to generate maximum resistance from Iran’s side,” and warns the new campaign could push Iran to escalate regional attacks rather than back down. Iran has weathered near-continuous US sanctions since 1979 and has built deep trading relationships that have let it dodge past pressure campaigns, according to the BBC. China remains Iran’s largest trading partner, accounting for 26.9% of its exports in 2025 by one estimate, and Beijing has already rejected the new sanctions as “illegal unilateral” measures. Turkey and Pakistan, both bordering Iran, face a harder balancing act: Turkey’s fragile economy (with inflation at 31.8%) can’t easily absorb a break from Iranian trade, while Pakistan, a mediator in US-Iran talks, has more exposure to US retaliation since Washington is its top export partner. There are also signs the pressure may be gaining some traction — the United Arab Emirates, previously Iran’s largest goods importer at roughly $21 billion in 2024 and a known sanctions-evasion route, has announced it is halting all trade and financial dealings with Iran.

What is the war costing the US economy?

Forbes contributor Michael Dempsey writes that beyond the direct economic toll, the war is generating a growing set of costly side effects for the United States, though the piece does not detail specific dollar figures. NPR notes the conflict has already battered the global economy, unsettled Gulf allies, and drawn down the US military arsenal, while sapping Trump’s negotiating leverage even as the administration’s war aims have shifted over time.

Why are investors attacking Bessent’s bond market strategy?

Separately from the Iran sanctions, Bessent has been trying to manage a shaky Treasury bond market by roughly doubling the department’s buyback program for longer-dated debt and by intervening in currency markets in July to support the yen, which kept the Bank of Japan from selling off Treasurys, according to CNBC. Those moves have nudged longer-term yields down slightly from levels not seen since before the 2008 financial crisis. But Wall Street broadly doubts Treasury has enough resources to control a market that issued $4.8 trillion in debt in 2025, a pace that could be topped this year, with total US debt just past $40 trillion and the 2026 budget deficit on track to exceed $2 trillion.

The sharpest criticism comes from Stanley Druckenmiller, the Duquesne Family Office chief who once partnered with Bessent and George Soros on the famous 1992 bet against the British pound. In a Wall Street Journal op-ed titled “Let the Bond Market Speak,” Druckenmiller argued that a 30-year yield of 5.5% “isn’t a crisis, it is an invoice,” and urged Bessent to scrap the buyback plan launched Aug. 19 and let the market price government debt without interference. He warned that “every basis point of artificial yield suppression is a subsidy to procrastination” and that once markets sense Treasury is defending a price, “every rise in yields becomes a test of official resolve.” His conclusion: “Governments defending prices against fundamentals always lose.” Treasury has reportedly also considered tapping its $935 billion general account to fund debt purchases, though CNBC notes even that may not be enough to change the market’s underlying skepticism. Treasury did not respond to CNBC’s request for comment.

Sources

• Forbes — Let Iran Control The Strait Of Hormuz? Why One Expert Thinks That’s The Right Move · Could Trump And Bessent’s ‘Operation Economic Outcast’ Actually End The Iran War? · Buckle In America — Iran War Costs Are Steep And Growing
• CNBC
• BBC Business
• NPR Business

Featured photo: Government of Japan via Wikimedia Commons (CC BY 4.0)