Tehran presses US to honour deal as Trump threatens to hit Iran ‘hard’

• Iran will reciprocate if the US honours its commitments under the June interim deal, but tensions remain high after recent missile exchanges.
• Both sides are avoiding a full-scale war but warn of harsh responses to further attacks, risking escalation from economic conflict to military action.
• Iran faces economic challenges with a plunging currency and high inflation, but claims sufficient foreign reserves and readiness to stabilise markets.

DUBAI – Iran has said it will reciprocate if the United States honours its commitments under a June interim deal on halting their conflict, but tensions remain high after US President Donald Trump threatened Tehran with further strikes.

The six-month-old conflict has shifted into an economic stand-off before a US attack on Iran’s Larak island on Aug 30, which Iran responded to by launching missiles overnight at two US air bases in Jordan.

“We’re going to hit them hard. There will be a response,” a Fox News reporter quoted Trump as saying on Aug 31, although Trump separately told reporters that the renewed strikes did not signal a return to full-scale war.

A senior Iranian source said the exchanges of fire were a “limited and contained confrontation”, but he added that Tehran would deliver a harsh response if attacked again.

While neither side appears to want a return to all-out war, their pledges to respond to further attacks highlight how quickly a conflict that has increasingly been fought through sanctions, blockades and economic pressure can spill back into military action.

Tehran has repeatedly said it will allow free navigation through the Strait of Hormuz only if Washington implements the terms of the memorandum of understanding (MOU) that both sides signed in June but quickly unravelled.

The MOU declared an end to fighting but deferred many of the most difficult issues and paved the way for a broader 60-day negotiation period, which passed without further agreement.

“I am stating clearly that if the US returns to its commitments under the Memorandum of Understanding, the Islamic Republic of Iran will immediately reciprocate,” Iranian President Masoud Pezeshkian said.

He was speaking in Bishkek, capital of Kyrgyzstan, during a summit of the Shanghai Cooperation Organisation, whose members also include Russia, China, India and Pakistan.

He also said on Aug 31 that war was in no one’s interest, and that Tehran was still open to a negotiated solution.

But there has been no sign of a breakthrough, and the heightened tensions this week have renewed fears of oil supply disruptions from the world’s key crude-producing region, with Brent futures rising another 1.3 per cent on Sept 1.

“The tit-for-tat missile exchanges between the US and Iran bring validation to those who believe that even if not a ‘forever war’, this conflict will run and run,” said PVM analyst John Evans.

Highlighting such concerns, two supertankers carrying Saudi oil were struck by unknown projectiles within minutes of each other while transiting outbound through the Strait of Hormuz late on Aug 31, according to data from shipping intelligence and tracking firms Marisks and Kpler.

Thousands have been killed in the conflict, mainly in Iran and Lebanon, since it began with US and Israeli strikes on Iran on Feb 28.

Washington has increasingly relied on economic pressure to try to force Tehran to stop blockading Hormuz and end the conflict.

US Treasury Secretary Scott Bessent has warned that countries doing business with Iran could face US sanctions, adding that secondary sanctions are likely to be unveiled weekly in the effort to pressure Iran, with an initial focus on banks.

Iran’s central bank governor, Abdolnaser Hemmati, said on Sept 1 that Tehran has sufficient foreign currency reserves.

The central bank is ready to inject up to US$2 billion (S$2.5 billion) into the foreign exchange market to calm recent volatility, Hemmati was quoted as saying by the semi-official Tasnim news agency.

“I am telling the President of the United States: Iran has (foreign) currency and it has enough,” he said.

His comments appeared partly aimed at reassuring markets after Iranian officials, including Pezeshkian, pointed to growing difficulties for Iran’s economy.

Iran’s currency plunged to a record low in August, crossing the psychological threshold of two million rials to the US dollar, while annual inflation reached 66 per cent in July. REUTERS