US Threatens Sanctions on Foreign Banks over Iran Dealings

The US Department of the Treasury has issued a warning to financial institutions in China, Hong Kong, the United Arab Emirates, and Oman over dealings with Iran, according to a letter reviewed by The Associated Press.

Washington signaled that banks in these regions could face punitive measures, including secondary sanctions, as part of its escalating economic pressure campaign against Tehran

In the letter, US authorities accused Iran of channeling financial transactions through foreign institutions, particularly in Hong Kong and the UAE, using networks of front companies.

The Treasury Department claimed these mechanisms enabled Iran to maintain access to the global financial system despite longstanding US sanctions, raising concerns in Washington over what it describes as "illicit activities".

According to the US Treasury, Iran allegedly processed at least $9 billion through US correspondent accounts in 2024, conducted through front companies, with a notable concentration in Hong Kong and the UAE.

Washington escalates threat of secondary sanctions

In a statement posted on the social platform X, the Treasury Department said financial institutions “should be on notice that the department is leveraging the full range of available tools and authorities and is prepared to deploy secondary sanctions against foreign financial institutions that continue to support Iran’s activities.”

Secondary sanctions allow Washington to target non-US entities, effectively extending its domestic measures beyond its borders and increasing pressure on international financial institutions to comply with its policies.

World Bank warns of global economic fallout from war on Iran

A senior official at the World Bank has voiced deep concern over the global economic consequences of the ongoing US-Israeli war on Iran, warning of mounting risks to inflation, employment, and food security, particularly across vulnerable regions in Asia and Africa.

Managing Director Paschal Donohoe said the institution is "extremely concerned" about the cascading effects of the war on Iran, as it works with member states to assess urgent needs and coordinate a response.

His remarks came as the World Bank announced a new partnership with the International Monetary Fund and the International Energy Agency aimed at aligning financial and policy measures to mitigate the crisis.

Rising global vulnerabilities

Donohoe highlighted that countries across Asia and Africa are particularly exposed to the economic shocks triggered by the war, including surging energy prices, disrupted supply chains, and declining economic output.

"At the moment, we are consulting with many governments and countries in relation to what their needs will be, and I would anticipate within the next number of weeks that will become far clearer," he said.

The war, which erupted after unprovoked US and Israeli aggression on Iran on February 28, has rapidly expanded into a broader regional confrontation, significantly affecting global trade and energy flows.

Tehran has effectively restricted access through the Strait of Hormuz, a critical maritime route through which approximately one-fifth of global oil and liquefied natural gas supplies pass, along with a substantial share of fertilizer shipments. Iran has done so in response to the US-Israeli aggression, specifically targeting US-Israeli-linked shipments or shipments benefiting US-Israeli interests. Some shipments heading to Turkiye, Malaysia, India, China, and other countries have been allowed through after coordinating with Iranian authorities.

The war has led to sharp increases in energy prices and reduced supply, with Asian economies among the hardest hit. Several countries, including Pakistan, Indonesia, and Bangladesh, have introduced fuel-saving measures to preserve resources for essential industries. Donohoe noted that many governments have raised concerns over income shocks resulting from rising prices, warning that households and businesses are facing increasing financial pressure.