Sanctions are being used to promote foreign policy outcomes at an accelerating pace, creating a complex environment that drives both risk and opportunity for business. Nowhere is this clearer than in the Middle East, where Western governments have escalated pressure on Iran, moved to restrict trade with Israeli settlements and dismantled the sanctions architecture targeting Syria.
Three rapidly evolving dynamics
Iran: secondary enforcement on the rise. Washington’s “Operation Economic Outcast” introduced five sectoral determinations in August, covering digital assets, technology, gold, aviation and shipping. The measures highlighted Washington’s intent to step up sanctions enforcement against any person, anywhere, operating in or supporting those Iranian sectors. International financial networks to Iran are squarely in scope: Washington designated the UAE branches of Egypt’s Banque Misr on 28 August, followed on 4 September by Türkiye’s Golden Global Investment Bank and additional sanctions on Russia’s VTB on 14 September.
This escalation reflects a strategic pivot. Having failed to secure a negotiated outcome, the administration is supplementing military action with economic warfare. The approach has limits: Iran’s circumvention pathways are well established, and despite the rial depreciating nearly 50% since December 2025 and oil exports falling “close to zero”, there is little indication that Tehran’ strategic calculus has shifted. Instead, Iran through its network of regional allies, stepped up attacks on regional critical economic infrastructure.
The EU and the UK have moved in the same direction, though not in step. The EU in February designated Iran’s Islamic Revolutionary Guards Corps (IRGC) as a terrorist organisation, enabling the freezing of any funds or assets belonging to the entity across all 27 member states. Brussels followed with Strait of Hormuz-related designations in June and further human rights listings in July. Meanwhile, the UK proscribed the IRGC under new state-threats legislation in July.
Israel: the risk lies in ambiguity. Meanwhile a suite of Western states are using economic sanctions to increase pressure on Israel in a bid to preserve the possibility of a two-state solution to the Israeli-Palestinian conflict. On 8 September, the UK, Canada, Denmark, Finland, France, Iceland, Ireland, Norway, Poland, Portugal, Spain and Sweden signed a joint statement announcing their intention to introduce national restrictions and/or support European restrictions on trade in goods originating from Israeli settlements. They cited continued settlement expansion, settler violence and tenders linked to the controversial E1 settlement project as motivations.
The measures primarily concern restrictions on imports of goods from Israeli settlements in the West Bank (Palestinian Territories), but the UK has gone further. Foreign secretary Ed Miliband announced plans for sanctioning powers against individuals and companies that “support, facilitate or profit” from the settlements – language that reaches into services, not merely goods. However, the laws enabling such powers are likely to take at least six-to-nine months to come into force, and the scope of restrictions will likely depend on the policies that the next Israeli government will implement following the 27 October parliamentary elections.
Syria: relief as opportunity. Sanctioning parties have also used the lifting of measures as an incentive mechanism for alignment, particularly with the new Syrian authorities of President Ahmed al-Sharaa. The shift has been rapid. With Executive Order 14312, the US revoked six foundational Syria orders in June 2025; the Bureau of Industry and Security of the US Department of Commerce relaxed export controls the following September; the Caesar Act, which laid the foundations for secondary sanctions, was permanently repealed in the National Defense Authorization Act of December 2025; and on 24 August 2026, the US rescinded Syria’s State Sponsor of Terrorism (SST) designation.
These measures, alongside similar moves by the EU, UN and third countries, have eliminated most restrictions on engaging with Syria. The SST label, one of the last remaining major designations on the country, had continued to spook foreign organisations after the substantive legal barriers fell, particularly among financial actors wary of terrorism-financing exposure. Its removal paves the way for greater financial reintegration, including through revived correspondent banking relationships.
Residual risk nonetheless endures. Hundreds of individuals and entities remain targeted under US, EU and third country designations, including former Assad regime figures and terrorist actors. In addition, efforts by Russia to maintain a foothold in Syria could translate into a growing presence of Moscow-backed players in the Syrian economy. Moreover, anti-money laundering and terrorism financing risks will remain elevated, in a financial system that remains highly dysfunctional.
How this affects the risk equation
Increased secondary enforcement. One of the most consequential features of the current developments in the sanctions space is the broadening geographical enforcement scope. In August, Washington designated the French biofuel refinery La Nivernaise de Raffinage SAS, at the same time as its owner, Singapore-based commodity trader Wellbred Trading, was sanctioned. Companies with indirect exposure to an Iranian nexus now face materially higher sanctions risk.
Key risk markets will include, among others, the UAE, Türkiye, China (including Hong Kong), Singapore, India, Iraq and Egypt. China and the UAE together account for close to half of Iran’s total foreign trade. Businesses should put counterparties domiciled in these jurisdictions under enhanced scrutiny, particularly in shipping, commodity trading, financial services and dual-use technology.
The US, EU and UK are not moving in lockstep, and the resulting patchwork creates a particularly complex compliance environment. Because each authority designates different entities at different moments, the same counterparty can be blocked under one regime and clean under another. For instance, Iran’s IRGC was proscribed by the US in 2019, but by the EU only from February 2026 and by the UK from July. In addition, the US has at times used sanctions as a lever in negotiations, for example issuing a general license for Iranian oil in June, before revoking it early in July.
The lack of clarity will sustain risks. Notably, the UK’s proposed measures against engagements with Israeli settlement remain largely undefined. Similarly, the EU’s internal divisions compound the uncertainty regarding the bloc’s ability to coordinate import restrictions on settlement goods. However, the lack of consensus on imposing EU-level sanctions has not prevented individual member states from implementing their own trade restrictions, as the Netherlands recently did on 22 September, bringing in force a ban on imports of goods produced in Israeli settlements.
What businesses should do now
Practical implications follow directly from increased sanctions use:
- Granular monitoring and enhanced due diligence: Designations are made at an accelerated pace as enforcement intensifies. Compliance functions using periodic screening risk missing exposure between review cycles. In addition, compliance functions must have thorough, risk-based protocols to investigate potential direct and indirect ties, including through adequate escalation mechanism and enhanced due diligence.
- Anticipate and map supply chains and counterparties: Organisations must have a clear view of the origin of inputs and end-uses of products, ownership structures of key counterparties (including suppliers, intermediaries and customers), and visibility on movement of funds and transactions made in high-risk markets. Companies should also seek to anticipate potential changes in sanctions regime to proactively manage exposure.
- Prepare for sanctions relief: Companies capable of adequately assessing exposure in Syria have gained an advantage in a complex market. Companies may similarly wish to consider preparations for the potential easing of sanctions against Iran as part of any deal that could be reached with the US in the coming years. The Syrian precedent demonstrates how quickly a jurisdiction can move from facing comprehensive restrictions to substantive openness.
Sanctions are moving faster than periodic screening can keep up with. Organisations that map exposure and prepare for change will be best placed to manage risk and seize opportunity. Contact Control Risks to understand what intensifying sanctions risk means for your business.