On Monday, the Trump administration warned countries to cut their business ties with Iran or face secondary sanctions as part of what it billed as an "economic D-Day," though the Treasury Department stopped short of imposing any penalties.
Oil prices were little changed on Tuesday, with Brent crude futures LCOc1 down 0.04% to $92.13 a barrel. U.S. crude CLc1 edged 0.1% higher to $85.08 per barrel; both measures fell more than 2% in the previous session.
Iran promised to retaliate against the expanded U.S. sanctions and expressed confidence that major trading partners would resist Washington's pressure campaign.
"We do not expect China - Iran's largest trade partner - to bow to U.S. pressure to cease commerce with Iran," said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
"The U.S.' campaign against Iran puts at risk the trade truce between the U.S. and China ahead of the leaders meeting next month."
Still, the threat of being cut off from the dollar-based financial system stoked rumours that some countries and banks might need to buy dollars in anticipation, lending support to the greenback.
The U.S. dollar extended gains against its Canadian counterpart CAD= and last stood at C$1.3860 after a rise of more than 0.5% in the previous session.
On Monday, U.S. President Donald Trump threatened to raise U.S. tariffs on all cars, trucks and automotive parts from Canada to 50% starting on January 1, escalating a trade fight after negotiations collapsed last week.
The euro EUR= was down 0.08% to $1.1656, while sterling GBP= eased 0.04% to $1.3624.
Market participants will be focused on Federal Reserve Chair Kevin Warsh's speech in Jackson Hole, Wyoming, on Friday, where investors are hoping for some clarity on the outlook for U.S. interest rates.
"Fiscal uncertainty is unlikely to fade soon ... there is scope, though, for the Warsh-led Fed to ease some monetary policy uncertainty by clarifying its reaction function - specifically, how long it is willing to keep rates on hold to see inflation return to its 2% target," Standard Chartered analysts said.
"All eyes will be on Chair Warsh's Jackson Hole speech for a signal, if not forward guidance."
Spot gold XAU= was down 0.3% at $4,635.89 an ounce.
In cryptocurrencies, bitcoin BTC= crossed the $80,000 level for the first time since mid-May, and last traded 2% higher at $80,506.75.
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