Live Updates: Iran looks to boost regional trade ties as U.S. turns from bombs to economic warfare

An assessment by the U.K. Navy's Maritime Trade Operations center shows the dramatic fall in commercial shipping through the Strait of Hormuz over the first 23 weeks of the U.S.-Israeli war with Iran. 

Only 21 full inbound and 18 outbound transits were recorded in the latest week reflected in the data, which was the week ending Aug. 7. Since then, UKTMO has continued to report very few vessels openly transiting the waterway, over which both Iran and the U.S. have imposed restrictions while asserting unilateral control.

The strait is the only way for ships carrying energy products from some major Mideast producers to reach global markets beyond the Persian Gulf, and while inbound and outbound transits ramped up for several weeks during a shaky ceasefire between the U.S. and Iran in June, they quickly tapered off again as fighting resumed.

Traffic remained at only about 4% of the pre-conflict average by the end of the first week of August. 

Shipping operators appear to be actively avoiding a higher-risk southern route close to Oman, which the Trump administration insists is safe and open despite Iranian threats, and opting more often for the northern route, which Iran controls. 

While major attacks by Iran and the U.S. have largely stopped, yielding to economic warfare amid the standoff over the strait, UKMTO still assesses the risk to the mariners in the waterway to be severe.

Tehran's grocery stores are well-stocked, but many families can barely afford the basics. Unemployment is soaring and those with jobs are working more hours for money worth half as much as a year ago, putting food, medicine and everything else —  except for heavily subsidized gasoline — further out of reach.

"We have virtually given up on many things," said Ahmad Karimi, 52, a taxi driver and father of two who has been working 15-hour days to make ends meet. "We're cutting out fruit, we're cutting out protein, we've given up leisure, we even work on weekends."

Nearly six months into the war with the United States and Israel, the Iranian economy is taking a beating under the force of sanctions and a naval blockade that is making it extremely difficult for the country to export oil, its most valuable product.

Since the war began, Iran has been attacking oil-rich neighbors and U.S. bases in the region, and disrupting shipping in the Strait of Hormuz, its biggest strategic advantage.

Iran is trying to use this retaliatory pressure — driving up energy prices globally — to bring the war to an end on the best terms possible. It is pressing for sanctions relief, and seeking enough control over the strait to demand payment from ships passing through to deliver energy and other goods.

The Trump administration — fighting over a waterway in a war that was launched to curb Iran's nuclear program — is promising even tougher sanctions to squeeze the Islamic Republic into submission. But experts say President Trump may be underestimating how long Iran can hold out.

Iran has been subject to Western sanctions for years and has become deft at partially circumventing them. It has expanded domestic production, used informal cross-border trade networks, bought restricted goods through third countries, and used a shadow fleet to transport its oil.

"Iran's resistance capacity not only avoids collapse, it also prevents the economic pain from translating into the political pressure and changes that the U.S. expects," said Hadi Kahalzadeh, an expert on Iran's economy at Brandeis University. 

Iran's Chief of Staff of the Armed Forces, Major General Abdolrahim Abdollahi, said Friday that the country's military was prepared to deliver a "devastating" response to any conventional or emerging threat from its adversaries.

In a message marking National Defense Industry Day, Abdollahi said in a post on the Telegram messaging app that Iran's armed forces maintained a comprehensive, modern readiness across land, sea, air and cyber domains, warning that any "miscalculation" by Iran's enemies would be met with "revolutionary, crushing, regret-inducing, and devastating" retaliation.

Iran's acting Defense Minister, Brigadier General Seyed Majid Ibn al-Reza, was quoted Friday by state media as stressing the link between national security and economic stability. He said Iran's defense industry had become one of the key pillars of its national security and deterrence against threats.

Iranian Parliament Speaker Mohammad Bagher Ghalibaf called on Iran and Iraq to strengthen economic cooperation and prepare for what he described as "unjust sanctions," warning that the United States and Israel had shifted toward economic warfare after failing to defeat the two countries militarily.

Speaking to Iranian and Iraqi businesspeople at the Iranian Embassy in Baghdad on Thursday, Ghalibaf said the two countries should develop mechanisms to withstand sanctions and reduce their dependence on the U.S. dollar.

"If you look at the resources and raw materials of Muslim countries, you will realize that our enemies come to plunder them," Ghalibaf said, according to a post on his channel on the Telegram messaging app. He called for plans to overcome sanctions and argued that Iran and Iraq could conduct trade using their own national currencies.

"Today, it is possible to conduct trade exchanges using national currencies and strike at the mouth of the U.S. dollar," he said.

Ghalibaf also stressed the close link between economic strength and security, describing them as "two wings of the same bird." 

Ghalibaf said the U.S. and Israel had recognized that they could not overcome Iran and Iraq through conventional military warfare and had therefore turned to "cognitive and economic warfare."

"You are now the soldiers and commanders of this battlefield," he told the business community.

Iran has finalized a preferential trade agreement with Oman, according to the Islamic Republic's official Trade Promotion Organization. 

The agreement, which Oman has not yet confirmed, still requires approval by Iran's parliament and other authorities. 

The announcement, relayed by Iranian state media, came two days after President Trump heralded a shift in U.S. tactics in the nearly six-month war to a "crushing economic operation," and seemingly away from the heavy weapons used during the first phase of the conflict.

Vice President JD Vance said Thursday "the most effective tool that we have is the economic pressure that we can apply" on Iran, as Treasury Secretary Scott Bessent underlined in an interview with CNBC that Washington expects both allies and rivals to join the ramped-up campaign against Iran.

"This is going to be the greatest coordinated economic isolation in the history of the world," he said, adding that the Trump administration was saying to all nations "you are either with us or against us."

Oman has discussed taking future joint control of the Strait of Hormuz with Iran for weeks, and those talks — which have included the notion of fees being charged for commercial ships to use the maritime route — have drawn stern warnings from the White House about interfering in Mr. Trump's push for a deal to end the war.

The Iranian trade office on Friday called the agreement with Oman part of Tehran's broader push to strengthen economic ties with regional partners through trade diplomacy and improved logistics infrastructure.

In addition to the Oman agreement, Iran is pursuing renewed preferential trade talks with Turkey, reopening border markets with Iraq and Turkey, and expanding its network of commercial centers and trade advisers across the region as part of a wider strategy to boost non-oil exports and regional economic cooperation.

China said on Friday that U.S. "sanctions and pressure" wouldn't resolve the Middle East conflict, after Washington urged governments including Beijing to join efforts to isolate Iran's economy.

"Sanctions and pressure will not help resolve the issue," Chinese foreign ministry spokesman Lin Jian told reporters at a news briefing, calling on "all relevant parties to take responsible measures and resolve the problem through political and diplomatic means."

President Trump threatened Iran with "economic D-Day" on Wednesday, vowing to wield "Economic Warfare and Isolation on an unprecedented scale." Iran quickly dismissed the threat as a distraction and said it would backfire.

Treasury Secretary Scott Bessent underlined in an interview with CNBC on Thursday that Washington expects both allies and rivals to join the ramped-up campaign against Iran.

"This is going to be the greatest coordinated economic isolation in the history of the world. And we are going to them and saying you are either with us or against us," he added in a message to allies.

Asked whether the United States would pressure China, Bessent said "many conversations are best to have in private," but called on Beijing to "get with the program."

CBS/AFP

Six European countries along with Canada condemned the latest development in a contentious Israeli settlement project near Jerusalem that would effectively cut the occupied West Bank in two.

Israel's Ministry of Construction and Housing issued a tender for constructing several compounds with more than 1,200 homes in total in an open tract of land east of Jerusalem. It's the latest step in a project under consideration for more than two decades, which critics say would prevent the establishment of a contiguous Palestinian state in the territory.

The joint statement from the leaders of the U.K., France, Germany, Italy, the Netherlands, Norway and Canada said international law is clear the settlement is illegal and noted "unprecedented levels of violence by settlers against civilians."

"We urge the government of Israel to retract these plans immediately and end its expansion of settlements in the West Bank. Not only will they take us further from peace, but they further undermine Israel's international standing," the countries wrote.

Egypt and Jordan also condemned Israel's move.

Israeli Foreign Minister Gideon Saar responded on Thursday by defending "the historic right of the Jewish people to reestablish their national home in the Land of Israel — including in the area in question."

Saar criticized the U.K. government for "blaming only Israel while ignoring Palestinian extremism."

A U.S. official confirmed to CBS News that the USS Abraham Lincoln aircraft carrier is headed home after a nine-month deployment. It could still take several weeks for it to get back to its home port in San Diego, California. 

The USS George Washington arrived in the Middle East Wednesday. 

In recent weeks, family members of Lincoln service members voiced worries about deteriorating mental health conditions aboard the ship, as well as sanitary conditions and food shortages.  

Read more here.

Vice President JD Vance on Thursday said the war with Iran had entered a "new phase where the most effective tool that we have is the economic pressure that we can apply to them."

In an interview on "The Clay Travis & Buck Sexton Show," Vance noted the "delicate dance" involved.

"We apply economic pressure to them, they're going to try to apply economic pressure to us," the vice president said. "But what has been true over the last couple of weeks is they felt a lot more pressure than we have. We're going to keep that going because we think that's the best way to ultimately accomplish the final objective here."

Earlier Thursday, Iran's foreign minister dismissed President Trump's threat from the previous day to wield "Economic Warfare and Isolation on an unprecedented scale," calling it a diversion from the burgeoning U.S. national debt and a "doubling down on failed policies." 

Mr. Trump threatened Iran on Wednesday with "an economic D-Day."