SWIFT, with headquarters just outside the Belgian capital Brussels, has never cut off a country before and said its decision reflected the extraordinary circumstances of international support for the intensification of sanctions against Iran.
The action follows a decision by the EU Council, which represents EU member states, to tighten asset freezes on a number of people and entities associated with Iran’s nuclear activities.
"The EU decision forces SWIFT to take action," SWIFT chief executive Lazaro Campos said in a statement.
"Disconnecting banks is an extraordinary and unprecedented step for SWIFT. It is a direct result of international and multilateral action to intensify financial sanctions against Iran."
Meanwhile in the US, the Obama administration welcomed SWIFT’s intention to stop transactions involving designated Iranian banks and said it reflected consensus in the international community that “substantially increased pressure” was needed to convince the Iranian government to address their concerns about its nuclear programme.
The US and EU accuse Iran of seeking to develop nuclear weapons – a charge Iran has repeatedly denied, claiming its nuclear programme is designed only for peaceful purposes.
The attempt to further strangle Iran’s finances effectively locks Tehran out of the global financial system, crippling 30 Iranian banks and the country’s lucrative crude oil industry in the process as the country relies heavily on electronic transfers to receive payments for the vital commodity.
It will isolate Iran financially, forcing it to either turn to wire transfer services or risk bartering in commodities such as gold to pay for transactions.
The governor of Iran’s central bank, Mahmoud Bahmani, reportedly said that the country would accept payment in gold "without any reservation" ahead of SWIFT’s decision.
Analysts give warning that SWIFT’s action, in what is all but the final blow to Iran’s financial network, is ultimately another dangerous step toward turning a financial war into a military conflict.