Two months into the US- and Israel-led campaign against Iran, the fighting has shown little sign of a quick end. Much commentary has concentrated on military and diplomatic limits, but the crisis also underlines a political shift: American economic coercion no longer has the same force it once did.
For decades the United States combined overwhelming military might with centrality in global finance. Washington relied on primary, secondary and targeted sanctions to pressure states such as North Korea, Russia and Iran. But the rise of China and a more multipolar world have diluted US leverage; economic coercion no longer carries the same automatic bite.
US policy toward Iran since 1979 has aimed at punishment, containment and isolation, frequently using sanctions tied to alleged terror sponsorship and nuclear activities. In the mid-2000s, coordinated US-EU measures severely restricted Iran’s access to European banking and markets, producing sharp economic strains. The 2015 nuclear agreement (JCPOA) traded restrictions on Iran’s nuclear program for relief from those penalties, briefly reopening economic ties. The US withdrawal in 2018 and renewed sanctions under President Trump, followed by Iran’s resumption of enrichment in 2019 and stalled negotiations under President Biden, reversed those gains and reinforced many firms’ reluctance to re-engage.
Cut off from key parts of the formal global financial system, Iran adapted. It improvised—moving oil by shadow fleets, investing in domestic production of weapons like inexpensive drones, and deepening commercial partnerships with China, Russia and other non-Western states. Those shifts have reduced the reach of Western economic pressure and made Tehran less susceptible to traditional coercive tools. Iran’s capacity to threaten shipping in the Strait of Hormuz and its suggestions to charge tolls on commercial traffic show how it can alter trade dynamics in its favor.
The clearest immediate blowback for the US has been through energy markets. The United States, a major producer and exporter of crude and refined petroleum, is vulnerable to oil-price shocks that follow disruptions in the Gulf. Higher pump prices inflict direct economic pain on American households and political costs for the administration. Moves to relax sanctions on Russian and Iranian energy to blunt domestic price spikes have undercut Washington’s sanctions credibility while doing little to prevent fuel-price rises tied to Gulf instability.
This erosion of coercive power reflects not only changes in relative material strength but also frayed alliances. The Trump era’s inability to build a broad, multilateral response to recent crises illustrated the waning of coalition-based leverage. As Washington leans more on unilateral, sanctions-first tactics, other powers—Russia and China—and regional actors like Iran have grown bolder and more resilient.
That does not mean the US lacks significant influence. But a reliance on immediate economic punishment, without concerted multilateral backing or credible alternatives, appears to be diminishing Washington’s capacity to shape outcomes while imposing growing strategic and domestic costs.
Charmaine N. Willis is assistant professor of political science at Old Dominion University, and Keith A. Preble is a teaching assistant professor at East Carolina University. This article is republished from The Conversation under a Creative Commons license.
