DUBAI — Lines at gas stations across Iran are growing and complaints about food prices rising. President Masoud Pezeshkian has conceded that U.S. sanctions have increased prices and cut trade. And the nation’s supreme leader, Ayatollah Mojtaba Khamenei, has called on the government to address “economic and livelihood challenges.”
Iran’s economy was struggling before the war and in the past six months has been battered by heavy U.S.-Israeli bombing of infrastructure and also a naval blockade that, according to Iranian and American officials, has sharply reduced oil exports.
Now, Iran is facing mounting pressure from new sanctions that the Trump administration is calling Operation Economic Outcast, which Treasury Secretary Scott Bessent said would bring “unprecedented” economic isolation.
But after decades of punitive measures imposed on Tehran by the United States and its allies, experts said that it is unlikely the latest sanctions will yield concessions from the regime and that they may actually lead to military escalation — a risk evidenced by new strikes over the weekend.
Any short-term impact, the experts said, will be felt mainly by Iranian civilians, whom President Donald Trump once pledged to help. Overall concessions from the regime are unlikely, they said.
“The economy in Iran is horrible, but it’s not the Weimar Republic,” Alan Eyre, a former diplomat who served on the U.S. negotiating team that secured the 2015 Iran nuclear deal, said referring to early-1920s Germany, when inflation was so high that paper money became virtually worthless.
“The point at which Iranian leaders say, ‘Ouch, stop it,’ isn’t when they make concessions but when they start attacking stuff,” Eyre added. “They know they have an incentive to attack before the midterms to hurt Trump.”
On Monday, Iran’s military said it targeted a base in the United Arab Emirates, a U.S. ally, a day after U.S. forces hit Iranian launchers that the U.S. military said were preparing to fire rockets from Larak Island in the Strait of Hormuz.
The strikes marked the first publicly acknowledged attacks on Iranian forces in nearly a month. In retaliation, Iran also fired ballistic missiles at a Jordanian air base housing U.S. troops.
The Trump administration, facing concerns from within the Pentagon about dwindling munitions stocks and the sustainability of a continued military campaign, as well as rising frustration from the American public, has said that it is transitioning primarily to economic warfare.
But Iran has survived under some form of sanctions since the establishment of the Islamic republic in 1979.
During the first Trump administration, the country was placed under a “maximum pressure” campaign. Back then and now, Eyre said, a major stumbling block has been China, which is Iran’s top trade partner and unwilling to bend to pressure from Washington.
“We have been milking the sanctions cow for decades,” Eyre said, adding that Iranian leaders often benefit financially from sanctions, because they control the means to circumvent them.
China aside, the Trump administration may also be overestimating the ease with which it can isolate Iran from its neighbors in the Persian Gulf, U.S. allies that have voiced concern about damage to their own economies.
The UAE said Aug. 19 that it was halting all trade ties with Iran because of Iranian targeting of UAE tankers.
But Alex Vatanka, a senior fellow at the Middle East Institute who focuses on Iran, said that it is hard to imagine countries like the UAE — which is Iran’s second-largest trading partner after China — “just turning a switch and turning off decades and decades of economic integration.”
In Dubai on a recent day, fruit and vegetables sellers at one of the biggest markets said that the vast majority of their products — including cucumbers, tomatoes and peppers — still came in containers from Iran.
A rug seller at a Persian carpet store said he was still getting rugs from Iran — now arriving via Turkey instead of coming directly into Dubai’s port. An Iranian spice merchant said that shipments of saffron were still arriving by plane.
While some shipments to and from Iran have stopped amid the war, others have continued, said a Saudi wholesaler who spoke on the condition of anonymity because of the sensitivity of the situation.
“There are almost 90 million people in Iran,” he said. “If they need food, we need to give it to them.”
Among Iranian officials, there has been a range of reactions to the Trump administration’s threat of “economic asphyxiation.”
President Pezeshkian, in an interview Friday, said that imports and exports were down as much as 35 percent. “Some say sanctions have no effect at all; to those people, I really don’t know what to say,” Pezeshkian told state TV.
“We are in a war situation,” he added. “And we must accept these wartime conditions.”
Economy Minister Ali Madanizadeh, meanwhile, said that Iran has years of experience circumventing sanctions. “We have our own tools, and we also know the game,” he said in an interview on state television last week.
On Saturday, Iran’s parliamentary speaker and top negotiator, Mohammad Bagher Ghalibaf, hit back at Bessent, calling the U.S. treasury secretary a “liar.”
Bessent had said that the blockade and new sanctions would “crush the failing Iranian economy” and that the U.S. had guided 130 million barrels of oil out of the Strait of Hormuz, while Iran had exported none.
“Liar liar pants on fire,” Ghalibaf wrote, posting on X. “For real 130s, tell your staffer to pull Moody’s showing $130+ billion in war costs.”
Regardless of the rhetorical jousting, Iran’s leaders are publicly acknowledging the hardship, with Iranian government spokesman Fatemeh Mohajerani saying last week that citizens should not expect conditions to improve in the next year.
Pezeshkian urged residents to reduce their energy consumption.
In Iran, people “are losing hope and very destabilized,” said Djavad Salehi-Isfahani, a professor of economics at Virginia Tech. “The situation feels intractable, and there are 87 million Iranians being held hostage to it.”
Salehi-Isfahani said that, despite the Trump administration’s hopes, it seems unlikely that Iranians will turn against their government at this moment. “They are the ones keeping the lights on right now,” he said.
Vatanka also said economic pain is “unlikely” to bring down the regime. Iranians, he said, saw that when they rose up in mass protests beginning late last year, no one came to their aid. Instead, the United States and Israel went to war.
Now, after the killing of many top officials, the surviving regime is even more hard-line, and repercussions of protest probably would be even more intense. “The thought among many,” he said, “is, ‘Why should we risk it at this point?’”
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