What matters for oil is if new U.S. secondary sanctions at some point hit China, Iran's biggest oil buyer

U.S. Treasury Secretary Scott Bessent on Monday announced a new round of financial actions aimed at Iran, describing the move as "an economic D-Day."

Global oil prices were pulling back on Monday but still holding above the $90-a-barrel mark, as traders assessed a pledge from Treasury Secretary Scott Bessent that the U.S. will crack down in new ways on countries that continue to do business with Iran.

Bessent's announcement of the launch of "Operation Economic Outcast," which he also billed as "an economic D-Day" for the Middle Eastern country, featured new sanctions for about 60 Iran-linked entities, but he also said the U.S. is giving other countries time to shut down their interactions with Iran's regime. He defended the Trump administration's decision to not yet impose secondary sanctions on Monday.

"We are giving everyone the opportunity to remedy bad behavior. Why would I want to blow up the global financial system? We believe that it is important to level set and give people a cure period, but they should know that that will move very quickly, and that we are serious. Secondary sanctions are a very powerful tool," Bessent said during a news conference.

The most-active West Texas Intermediate crude contract (CL00) (CLV26) for October delivery was down 2.6% on Monday to trade at around $84.82 per barrel, while October Brent crude (BRN00) (BRNV26) , the global benchmark, slipped 2.6% to around $91.98 per barrel.

When asked why Chinese banks are not yet being targeted, Bessent responded at his news conference that "no one is above the reach of U.S. sanctions," but that American officials "find that the best way to engage with countries is through quiet diplomacy, and we are level-setting with every country to tell them our expectations."

One key is how much any future U.S. sanctions could affect China, and whether Beijing pushes back. China has for years been the biggest buyer of Iranian oil.

In his remarks on Monday, Bessent said new determinations on sectoral sanctions issued on Monday are targeting five of Iran's most vital pipelines - digital assets, technology, gold, aviation and shipping.

"I would expect that you will see a major announcement of a financial institution being sanctioned by the end of this week," the Treasury secretary also said.

As the conflict between the U.S. and Iran nears the six-month mark, Bessent said in an op-ed in the Financial Times published before Monday's news conference that "an economic D-Day is coming for Iran." He blasted what he called "Iran's enablers" that "purchase and transport its petroleum," saying these nations "now exceed the limits of America's tolerance."

On Sunday, the secretary of Iran's Supreme National Security Council, Mohsen Rezaei, said that the country would halt all oil exports through the Strait of Hormuz and the Persian Gulf if U.S. economic pressure continues.

"If the economic war continues, not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere in the Persian Gulf," Rezaei said in a post on X. He added that any participation in U.S. sanctions against Tehran will be treated as "an act of war" against the Iranian people.

-Victor Reklaitis -Isabel Wang