• Markets: Stocks closed mixed yesterday as chip stocks…dipped following reports that Nvidia is raising some of its prices. Sandisk and Micron were among the companies that fell.

Embargomaxxing

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The Trump administration announced trade measures aimed at economically isolating Iran yesterday that it had previously teased as “economic D-Day”…but Treasury Secretary Scott Bessent said it was more of a “warning shot” than a full-scale assault.

Dubbing the plan “Operation Economic Outcast,” Bessent said the US will impose devastating sanctions against countries that enable Iran to illicitly trade in oil, crypto, aviation, gold, technology, and shipping in order to cause the “economic asphyxiation” of the regime:

• But Bessent said the US is giving countries time to “remedy their bad behavior” and that it wouldn’t want to “blow up the global financial system” with immediate action.
• He also announced immediate sanctions against 60 entities, individuals, and vessels the US says are enabling the Iranian regime’s “recklessness.”

Bessent noted that the UAE, Iran’s biggest import partner, already cut off all trade ties with Iran last week and said President Trump was asking other countries to do the same.

China-shaped elephant in the room

When a reporter asked Bessent about enforcement against China—which purchased 80% of Iran’s oil before the war—Bessent said no one would be exempt. But analysts say it’s unclear if the Trump administration will risk antagonizing the country with sanctions amid a tenuous trade truce and before its leader Xi Jinping’s visit to the US next month.

However, Iran’s oil exports to China have already reportedly fallen since the US began blockading the Strait of Hormuz.

Will it work?

The Trump administration is banking that economic punches will force Iran to lift its chokehold on the Strait of Hormuz, which has pushed up energy prices ahead of the US’ midterm election.

But while Iran’s currency fell to a record low against the dollar ahead of Bessent’s announcement, worldwide markets reacted with a shrug. Some experts say that while additional sanctions might deepen economic pain for ordinary Iranians, after years of sanctions, the US doesn’t have much economic ammo left in its arsenal that would force Iran’s leadership to acquiesce.

Iran has vowed to retaliate, possibly militarily.

Diplomacy is also ongoing: Oman is continuing negotiations with Iran about easing navigation through the Strait of Hormuz, and Pakistan’s army chief arrived in Tehran yesterday to urge renewed peace talks with the US.—SK

      

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