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WASHINGTON/DUBAI (Reuters) - The United States on Monday restored sanctions targeting Irans 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 U.S. President Donald Trump to curb Tehrans missile and nuclear programs and diminish the Islamic Republics influence in the Middle East, notably its support for proxies in Syria, Yemen and Lebanon.

Trumps moves target Irans main source of revenue - its oil exports - as well as its financial sector, essentially making 50 Iranian banks and their subsidiaries off limits to foreign banks on pain of losing access to the U.S. financial system.

The return of the sanctions was triggered by Trumps May 8 decision to abandon the 2015 Iran nuclear deal, negotiated with five other world powers during Democratic President Barack Obamas administration. That agreement had removed many U.S. and other economic sanctions from Iran in return for Tehrans commitment to curtail its nuclear program.

Trump denounced the deal because of time limits on some of Irans nuclear activities, as well as for its failure to address other Iranian activity that the United States does not like.

In abandoning the agreement and imposing sanctions that it had lifted as well as adding new ones, the United States is betting the economic pressure will force Iran to change its behavior 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, U.S. Secretary of State Mike Pompeo told reporters.

We hope a new agreement with Iran is possible.

Speaking before Pompeo detailed the U.S. sanctions, Iranian President Hassan Rouhani accused the United States 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 knuckle under to U.S. pressure, at least in the short term.

The increasing pressures on Iran will not change the behavior of the regime any time soon, said Dennis Ross, a former U.S. official now at the Washington Institute for Near East Policy.

Iranian Foreign Minister Mohammad Javad Zarif said U.S. bullying was backfiring by making Washington more isolated, a reference to other world powers opposed to the initiative. The other parties to the 2015 nuclear deal, Britain, China, France, Germany and Russia, have said they will stay in it.

The sanctions are designed, in part, to force Irans main customers to stop buying its oil. However, the United States gave 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, Brian Hook, the U.S. special representative for Iran, told reporters in a conference call, saying Iraq was working on reducing Irans influence and opening Kirkuk, which would be another 200,000 barrels of oil.

In June Iran said that Baghdad and Tehran had begun exchanging crude oil.

Crude from the Kirkuk field in northern Iraq is being shipped by truck to Iran. Tehran will use the oil in its refineries and will deliver the same amount of oil to Iraqs southern ports, on the Gulf.

The sanctions also cover 50 Iranian banks and subsidiaries, more than 200 persons and vessels in its shipping sector, Tehrans national airline, Iran Air, and more than 65 of its aircraft, a U.S. Treasury statement said.

The administration said it had toughened the sanctions by roughly 300 new designations on individuals and entities, and targeted more subsidiaries of Iranian companies than before.

European powers that continue to back the nuclear deal said they opposed the reapplication of sanctions and major oil buyer China said it regretted the move.

Switzerland said it was holding talks with the United States and Iran about launching a humanitarian payment channel to help food and drugs keep flowing to Tehran.

U.S. 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 Belgium-based SWIFT financial messaging service said it is suspending some unspecified Iranian banks access to its messaging system in the interests of the stability and integrity of the global financial system.

The head of Irans Central Bank, Abdolnassr Hemmati, said the country has taken necessary banking measures to continue trade after the U.S. move, Iranian state TV said.

The European Union, France, Germany and Britain said they regretted the U.S. 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 Nov. 4 but not operational until early next year.

Trump told reporters he wanted to impose the oil sanctions slowly so as not to cause a shock to the market.

Oil prices were mixed on Monday after a steep five-day fall. Brent crude LCOc1 futures rose 34 cents to settle at $73.17 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 4 cents to settle at $63.10 a barrel.

Prices rallied to near four-year highs in early October on expectations the imposition of sanctions would create a global supply shortage. However, news of the waivers last week sent prices lower as top buyers would continue to import Iranian oil.

Graphics

Iran's nuclear program tmsnrt.rs/2D0wdT3

Iran's crude exports 1975-2018 tmsnrt.rs/2CUMBnT

Iran's crude exports, production tmsnrt.rs/2CRTM0h

Writing by William Maclean and Arshad Mohammed; Editing by Jon Boyle, Richard Balmforth and Bill Trott

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