U.S. Secretary of State Mike Pompeo makes his first public address at the Heritage Foundation in Washington, DC on May 21, 2018. Amanda Macias/CNBC

Secretary of State Mike Pompeo has announced a list of a dozen demands that Iran must meet before the United States lifts punishing sanctions against the country. However, the list is a non-starter and raises the specter of a prolonged standoff in the world's busiest oil exporting region. Pompeo articulated the list at the conservative Heritage Foundation on Monday, in his first major speech as the nation's top diplomat. The address clarified the U.S. playbook for containing Iran following President Donald Trump's announcement that he will abandon a 2015 nuclear deal with Iran and restore sanctions on the Iranian economy, including its lifeblood oil industry. That decision has already helped boost oil prices to 3½-year highs and exacerbated frayed trade tensions with European allies, who are now developing measures to help their companies evade sanctions they helped implement just a few years ago.

I think events are moving in a more confrontational direction and by summer's end we may be back to a situation like 2012 where we worried about critical [oil market] chokepoints Helima Croft RBC Capital Markets global head of commodity strategy

The speech in its entirety was more assertive than some analysts anticipated. It made clear that the Trump administration is not merely using sanctions as a negotiating tool, but intends to pursue them to force major changes in Iran, said Henry Rome, researcher at risk consultancy Eurasia Group. The address also suggested that Washington will not grant European companies sanctions waivers, he said. Prior to the speech, Eurasia Group said the U.S. exit "creates major risk for markets, the Middle East, and transatlantic relations" that would increase if the administration takes an aggressive stance. However, it was the list of 12 conditions for lifting sanctions and reincorporating Iran back into the international financial order that struck many Middle East-watchers. "The demands amount to a fundamental change in Iranian policy, if not the regime itself," Rome said in a policy brief to clients on Monday. "The Iranian regime will almost certainly reject Pompeo's demands out of hand," said Rome.