President Donald Trump now says that countries doing business with Iran will face a 25% tariff on trade with the US, in response to a deadly crackdown on anti-government protests.
The tariff is "effective immediately", the president posted on his media platform Truth Social, adding: "This order is final and conclusive."
Iran is already under severe US sanctions, facing a collapsing currency and inflation that has pushed food prices up by as much as 70%.
Food makes up about one-third of Iran's imports, and further restrictions caused by the tariffs could worsen shortages and costs.
China is Iran's largest trading partner, followed by Iraq, the United Arab Emirates, Turkey and India.
Trump has also been briefed on a range of military and covert options for use in the country, officials tell the BBC's US partner CBS News - including long-range missile strikes, as well as cyber and psychological tools
In recent days the US president has warned of a possible military intervention if protesters were killed - his national security team is expected to meet later to discuss options.
Iran's foreign minister says Tehran is open to talks with Washington, but remains "prepared for war".
At least 648 protesters have been killed in the ongoing crackdown in Iran, a human rights group says - but warns the death toll could be far higher.
A days-long internet blackout is making it difficult to verify information coming out of the country, and the BBC and most other international news media are unable to report from Iran.
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