Mr Trump said the additional sanctions were in response to the shooting down of a US drone and "many other things".

Ayatollah Khamenei, Iran's highest authority, was singled out because he was "ultimately responsible for the hostile conduct of the regime".

Iranian Foreign Minister Javad Zarif said the Americans "despise diplomacy".

In a tweet sent after the announcement, Mr Zarif also accused the Trump administration of having a "thirst for war".

ensions between the two countries have been escalating in recent weeks.

However, US Treasury Secretary Steve Mnuchin said Mr Trump's executive order - which would lock up "billions" of dollars in Iranian assets - was in the works before Tehran shot down an unmanned US drone in the Gulf last week.

The UN Security has urged calm and the use of diplomacy.

Who is affected?

The US Treasury department said eight senior Iranian commanders who "sit atop a bureaucracy that supervises the IRGC's [the elite Islamic Revolution Guard Corps] malicious regional activities", were being targeted

It added that Mr Trump's executive order would also "deny Iran's leadership access to financial resources and authorises the targeting of persons appointed to certain official or other positions by the Supreme Leader or the Supreme Leader's Office", as well as foreign financial institutions which help them conduct transitions.

Sanctions will also be imposed on Mr Zarif later this week, according to Mr Mnuchin.

Tightening its squeeze

Putting sanctions on the Ayatollah Ali Khamenei is significant. He is indeed the Supreme Leader, with the ultimate say in Iran's politics and military - and he has enormous economic power.

He supervises an organisation known as Setad, which confiscated property abandoned after the 1979 revolution and morphed into a business juggernaut with holdings of about $95bn (£75bn).

Setad was already under US sanctions, but President Trump has gone further, targeting anyone connected to the Ayatollah - presumably including those sitting on company boards, or officials in his extensive "shadow government".

So the US administration is tightening the squeeze on already draconian oil and financial sanctions and waiting to see if Tehran will eventually be forced to capitulate and accept negotiations.

The US is demanding that Iran end its nuclear programme, curb its missile production and stop support for partner Arab militias.

Secretary of State Mike Pompeo has said the "maximum pressure" campaign is denying Iran revenue to support its regional military operations.

That might be the more important goal for hawks such as Mr Pompeo, who has said he doesn't believe the Iranian regime can change in the way the US administration is demanding.

Why is the US imposing sanctions now?

Back in May 2018, the White House reinstated all sanctions removed under a 2015 nuclear deal made with world powers which sought to prevent Iran creating its own nuclear weapon.

Relations between the two nations continued to sour, and in May - a year after Mr Trump abandoned the nuclear deal - the US stepped up pressure on Iran by ending exemptions from secondary sanctions for countries still buying Iranian oil.

This was followed by a series of attacks on tankers in the Gulf, which the White House said Iran was behind. Tehran has denied all allegations.

Iranian officials then announced the country was set to breach the limit on its stockpile of enriched uranium that was set under the 2015 deal on 27 June.

Days later, the drone was shot down over what the US says was international waters, but Iran says was its territory.