An archive photo of US President Donald Trump (Picture: PA).
Iran President Hassan Rouhani has accused the US of 'psychological warfare' after sanctions were reimposed on the country.
The move comes three months after the United States pulled out of the Iran nuclear deal, with President Trump saying his policy is to exert "maximum economic pressure" on the country.
President Trump said the international decision in 2015 to freeze Iran's nuclear programme in return for the lifting of sanctions was a "horrible, one-sided deal".
He also said the deal left the Iranian government flush with cash to use to fuel conflict in the Middle East.
President Trump said: "We urge all nations to take such steps to make clear that the Iranian regime faces a choice: either change its threatening, de-stabilising behaviour and reintegrate with the global economy, or continue down a path of economic isolation."
He went on to warn those who did not reduce their economic ties to Iran would "risk severe consequences" under the sanctions.
US Secretary of State Mike Pompeo said renewed US sanctions on Iran will remain until the Iranian government radically changes course.
Mr Pompeo said: "We're hopeful that we can find a way to move forward but it's going to require enormous change on the part of the Iranian regime.
"They've got to behave like a normal country. That's the ask. It's pretty simple."
European foreign ministers said they "deeply regret" the reimposition of US sanctions.
A statement by European Union foreign policy chief Federica Mogherini and the foreign ministers of France, Germany and the United Kingdom insisted that the 2015 Iran nuclear deal "is working and delivering on its goal" of limiting Iran's nuclear programme.