Iran is suffering under increasing economic pressure two months into a renewed U.S. naval blockade of its ports that has choked off oil exports, has deprived Tehran billions of dollars in critical state revenue and is threatening the country with a severe shortage of the foreign currency it needs to pay for remaining imports.
Inside the country, people are reporting new shortages of gasoline and electricity alongside persistent, debilitating inflation that has remained above 80 percent for months. Meanwhile, Iran’s currency, the rial, plummeted to another historic low this month, at more than 2.3 million to the dollar.
So far, however, there is little sign that the financial pain is translating into pressure on Iran’s leadership sufficient to force a return to talks and end the war.
Tehran has refused to moderate its claim over the Strait of Hormuz, a stance that contributed to the collapse of planned talks in Oman last week. And Iranian forces continue to attack ships that defy Tehran’s warning by using a U.S.-backed route through the strait.
Mina, 34, a cafe worker from eastern Tehran, said prices are rising so fast, she has stopped saving for purchases — by the time she reaches her goal, the price has risen again beyond her means. Like other Iranians interviewed for this report, she spoke via messaging apps, on the condition that she be identified only by her first name for fear of reprisal.
“We can’t think about the future at all, or plan for it,” she said.
After failing to secure a decisive victory through military means, the Trump administration launched an economic pressure campaign against Iran in August, with a wave of new sanctions dubbed Operation Economic Outcast. But the recent increase in economic hardship in Iran appears to be more closely linked to the U.S. blockade reimposed in July, analysts say.
Treasury Secretary Scott Bessent has pledged to sever “every economic lifeline” connecting Iran to the global financial system with new sanctions targeting Tehran’s trading partners. Measures against entities in the United Arab Emirates, Turkey and Russia have been announced.
But after withstanding U.S. sanctions for decades, Iran’s leaders have made structural changes to the country’s economy to insulate themselves from outside economic pressure, said Esfandyar Batmanghelidj, the chief executive of the Bourse & Bazaar Foundation, a London-based think tank that tracks Iran’s economy.
“Iranian authorities know the country’s economy is taking a beating, but they are thinking like an outmatched boxer that is aiming to tire out their opponent in 12 rounds,” Batmanghelidj said. “They may be absorbing body blows, but they will stay on their feet, bide their time and hit back.”
The blockade appears to be increasing the impact of other Trump policies. With sanctions alone, the Trump administration’s economic pressure campaign could take years to hurt Iran’s leadership, said Miad Maleki, who worked on sanctions policy at the Treasury Department and is now a senior fellow at the Foundation for Defense of Democracies, a Washington think tank with a hawkish stance toward Iran.
“What has changed is the naval blockade,” Maleki said. “It’s really accelerating the effect of sanctions.”
Iran’s economy has been badly battered by months of war with the United States and Israel. Thousands of structures were damaged or destroyed by tens of thousands of airstrikes, and attacks on infrastructure have had an outsize impact on unemployment. In July, the International Monetary Fund predicted the Iranian economy would contract by 5.4 percent over the next year.
Under the blockade, Iran is losing billions of dollars in monthly state revenue. During earlier stages of the war, Iran continued to export millions of barrels of oil a day, but it has the capacity to only export some 250,000 barrels by road and rail, according to Kpler, a maritime data company.
In an effort to generate income elsewhere, Iran this month announced plans to scale back subsidies on imported gasoline, a move that doubled the cost of some fuel for consumers. The announcement triggered a run on fuel stations as people rushed to fill up their tanks before the increase.
Following the announcement, Iranians reported a large deployment of security forces to fuel stations and elsewhere. Protests sparked by economic grievances plunged Iran into crisis just months before the war with Israel and the United States — in what Iran’s enemies see as a potential road map for overthrowing its government. Iran used overwhelming deadly force to suppress the protests and dissuade further uprisings.
“Not only does the government not help, it makes everything more expensive,” said Hamid, 37, a Tehran resident who works as a driver for the Iranian ride-hailing service Snapp.
Iran’s Foreign Ministry called the U.S. initiatives “economic terrorism” and vowed not to bend to the pressure. Instead, Iran has continued to attack ships in the Strait of Hormuz, and its allied forces, the Houthis in Yemen, have escalated attacks on Saudi Arabia and advanced around a second critical waterway, the Bab al-Mandab strait.
“If Washington wants to escape the quagmire it has created for itself and avoid getting further entangled in it, it has no choice but to accept Iran’s rights and conditions,” Iranian Supreme National Security Council Secretary Mohsen Rezaei said on X over the weekend.
Iranian officials have said they support a return to a Memorandum of Understanding signed by Trump and his Iranian counterpart in June. Iranian officials interpret that agreement as recognizing Tehran’s control over the strait.
Tehran has maintained some state revenue by selling oil already exported. From mid-June to mid-July, while a 60-day peace framework was in place, Iran rushed more than 60 million barrels of oil out of its ports, according to tallies compiled by oil analysts.
Since then, that stock has dwindled to roughly 30 million barrels essentially sitting in floating storage that Iran is slowly selling at a rate of half a million barrels a day, according to a tally kept by Maleki.
Without oil revenue, Iran’s ability to pay for imports and fund state functions, like salaries for its security forces, is steadily diminishing, according to Gregory Brew, an Iran analyst with the Eurasia Group, a political risk consultancy.
“Iran is on a collision course” with its foreign exchange, he said, and the lack of oil revenue “could create a tremendous crisis, a kind of typical balance of payments crisis.” But such a crisis isn’t a certainty.
Iran’s oil exports were pushed to near zero in 2019 after Trump withdrew from the Obama administration’s nuclear deal and imposed sanctions under the “maximum pressure” campaign. At the time analysts made similar predictions about an impending economic crisis in Iran in 2020, but after suffering a pretty significant contraction, Iran’s economy bounced back, and by 2023 it was growing again.
“This is a system and a government that’s adapted to these kinds of economic crises in the past,” Brew said.
Hiva, 40, a content creator from western Tehran, said rising prices have forced her household to cut back on groceries and now, they no longer buy red meat or fruit.
She said everything has become more expensive: A bag of coffee now costs nearly four times what it did a year ago and sangak, a traditional Persian flatbread, is six times more expensive.
“In my view, sanctions target people’s livelihoods more than they put pressure on those in power,” she said.
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