The United States has reimposed sanctions targeting Iran's oil, banking and transportation sectors and threatened more action to stop its "outlaw" policies, steps the Islamic Republic called economic warfare and vowed to defy.
The measures are part of a wider effort by US President Donald Trump to curb Tehran's missile and nuclear programs and diminish the Islamic Republic's influence in the Middle East, notably its support for proxies in Syria, Yemen and Lebanon.
Trump's moves target Iran's main source of revenue - its oil exports - as well as its financial sector, essentially making 50 Iranian banks off limits to foreign banks on pain of losing access to the US financial system.
The return of the sanctions was triggered by Trump's May 8 decision to abandon the 2015 Iran nuclear deal, negotiated with five other world powers during Democratic President Barack Obama's administration.
That agreement had removed many US and other economic sanctions from Iran in return for Tehran's commitment to curtail its nuclear program.
The US is betting the economic pressure will force Iran to change its behaviour and agree to a new, much more restrictive deal.
"The Iranian regime has a choice: it can either do a 180-degree turn from its outlaw course of action and act like a normal country, or it can see its economy crumble," US Secretary of State Mike Pompeo told reporters.
"We hope a new agreement with Iran is possible."
Speaking before Pompeo detailed the US sanctions, Iranian President Hassan Rouhani accused the US of targeting ordinary Iranians and said the Islamic Republic would find a way to "continue to sell our oil ... to break sanctions."
"The enemy is targeting our economy ... the main target of sanctions is our people," he said. "This is an economic war against Iran."
Some analysts are skeptical Iran will buckle under to US pressure, at least in the short term.
The sanctions are designed, in part, to force Iran's main customers to stop buying its oil.
However, the US has given temporary exceptions to eight importers - China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea - allowing them to keep buying from Iran. Iraq has also been given an exemption.
US sanctions permit trade in humanitarian goods such as food and pharmaceuticals but measures imposed on banks and trade restrictions could make such items more expensive as well as more difficult to pay for.
The United States will allow non-proliferation civil nuclear work at Arak, Bushehr and Fordow in Iran "under the strictest scrutiny," the State Department said on Monday.
The European Union, France, Germany and Britain said they regretted the US decision and would seek to protect European companies doing legitimate business with Tehran.
Diplomats told Reuters last month that a new EU mechanism to facilitate payments for Iranian oil exports should be legally in place by November 4 but not operational until early next year.
