Brussels has moved to ban European companies from complying with US sanctions on Iran and protect them from American court judgement, as relations between the bloc and Donald Trump deteriorate further over Washington dumping the nuclear deal.

The European Commission on Friday began the formal procedure to update its “blocking statute”, the most powerful response it can muster in response to Mr Trump, to protect EU investments in Tehran after EU leaders backed the plan at a summit on Thursday.

The move risks infuriating the unpredictable president and could escalate a looming trade war with the US, which has threatened tariffs on EU steel imports in a separate dispute.

Meanwhile Angela Merkel, the German chancellor, will hold talks with Vladimir Putin in the Black Sea resort of Sochi, over the fate of the nuclear deal, which is co-signed by Russia.

The statute will ban EU companies or people from observing the sanctions that Mr Trump vowed will be reintroduced as he ditched the Iran nuclear deal.