Iran’s Economy Comes Under Growing Pressure as War and US Sanctions Hit Trade

Tehran, Iran is facing intensifying economic pressure as the continuing conflict with the United States, tighter American sanctions and restrictions on maritime trade weigh heavily on the country’s economy.

Iranian President Masoud Pezeshkian said the country’s foreign trade has fallen by nearly 35%, attributing the decline to US sanctions and what Iranian authorities describe as a naval blockade affecting the country’s ports. The statement came as Tehran acknowledged the growing economic difficulties facing businesses and households.

The latest developments have increased concerns about inflation, employment, purchasing power and the availability of goods.

Inflation Becomes a Major Domestic Concern

Iran’s economic problems are becoming increasingly visible in everyday life.

Annual inflation reached approximately 66% last month, according to figures cited in recent reporting. Rising prices are putting additional pressure on households already dealing with reduced economic activity and disrupted trade.

Iran’s leadership has acknowledged that controlling prices and protecting livelihoods must become a central government priority.

Supreme Leader Ayatollah Mojtaba Khamenei called on the government to address inflation, unemployment and difficulties affecting markets and essential goods.

Foreign Trade Suffers a Sharp Decline

The reduction in foreign trade is one of the clearest signs of the economic impact of the conflict.

Pezeshkian said Iranian exports and imports had fallen by almost 35%. Restrictions on shipping and financial transactions have made it more difficult for Iranian businesses to maintain normal international commerce.

For an economy that depends heavily on energy exports and imported industrial and consumer products, prolonged disruption can have consequences across multiple sectors.

Businesses can face higher transportation costs, difficulty obtaining supplies and delays in receiving payments from overseas customers.

US Sanctions Add Another Layer of Pressure

Washington has intensified its economic campaign against Tehran.

The United States has warned countries and companies that maintaining certain business relationships with Iran could expose them to secondary sanctions. American authorities have also targeted financial institutions and entities accused of supporting Iranian trade.

Among the latest measures, the US Treasury moved against Banque Misr, an Egyptian bank, over dealings connected to Iran. The bank said it was reviewing the Treasury notice, while Egypt’s central bank said the measure concerned US-dollar transactions involving the bank’s UAE branch.

Such measures could make international companies and banks more cautious about conducting transactions involving Iran.

Tehran Wants to Reduce Dollar Dependence

Iran’s government has indicated that reducing dependence on the US dollar will form part of its response.

Officials have discussed encouraging domestic production, directing investment toward local industries and strengthening alternative economic relationships.

The objective is to make the economy less vulnerable to restrictions imposed through the US-dominated international financial system.

However, replacing established international financial channels is a complex process, particularly for a country facing restrictions on trade, banking and access to foreign currency.

Oil Remains Iran’s Economic Lifeline

Despite the pressure, Iran has continued attempting to sell crude oil.

Pezeshkian said Iran managed to sell approximately 90 million barrels of oil during a short-lived memorandum of understanding with Washington in June, when restrictions on Iranian oil sales were temporarily eased.

Iranian officials have subsequently called for the revival of that temporary arrangement.

Oil revenue remains critical because it provides the foreign currency needed to finance imports and support government spending.

Strait of Hormuz Adds Global Risk

The economic crisis is closely connected to the dispute over the Strait of Hormuz, one of the world’s most important energy corridors.

Before the conflict, roughly 20% of global oil and LNG supplies moved through the waterway. Disruptions there can therefore have consequences far beyond Iran’s borders.

The United States says the strait has been cleared for shipping, while Iran’s Islamic Revolutionary Guard Corps has disputed that characterization and maintained that vessels require Iranian permission.

The conflicting claims have created uncertainty for international shipping companies and energy traders.

Diplomacy Remains an Option

Despite the worsening economic situation, Tehran has not completely abandoned diplomacy.

Qatar and Pakistan have been involved in efforts to encourage renewed dialogue between Iran and the United States.

Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani recently met Iranian officials in Tehran and stressed the importance of restoring normal shipping conditions through the Strait of Hormuz. Iran’s Foreign Minister Abbas Araqchi described the discussions as constructive.

Iran has described diplomacy and defence as parallel elements of its strategy.

Businesses Face a Difficult Environment

Iranian companies are operating in an increasingly uncertain environment.

Import restrictions, currency volatility, high inflation and reduced international trade can make it difficult for businesses to plan investment and production.

Companies that depend on imported raw materials may face higher costs, while exporters can struggle with payment channels and shipping restrictions.

Smaller businesses are particularly vulnerable because they generally have fewer financial resources to absorb sudden increases in operating costs.

Household Purchasing Power Under Pressure

The economic consequences are also being felt by ordinary citizens.

When inflation rises rapidly, salaries often fail to keep pace with the cost of essential goods. Food, transport, housing and other household expenses can consume a larger share of family income.

This can force households to reduce spending on non-essential products and services, creating another source of pressure for businesses.

The government has therefore placed employment, price management and domestic production among its stated economic priorities.

International Economic Consequences

Iran’s economic difficulties could also affect countries outside the region.

A prolonged reduction in Iranian oil exports could influence energy markets, particularly if disruptions in the Strait of Hormuz continue.

Countries that rely heavily on Middle Eastern energy supplies may face higher transportation and production costs if global energy prices rise.

Financial institutions and multinational companies must also consider the risks associated with US secondary sanctions when deciding whether to maintain commercial links with Iran.

The Road Ahead

Iran’s economic outlook will depend heavily on developments in the conflict and the possibility of renewed diplomacy.

A restoration of normal shipping through the Strait of Hormuz and some easing of sanctions could provide immediate relief to trade and oil exports.

Conversely, further sanctions, prolonged maritime restrictions or a wider regional escalation could deepen inflation and economic contraction.

For now, Tehran is attempting to balance three difficult objectives: maintaining economic activity, resisting external pressure and keeping diplomatic channels open.

The latest acknowledgement from Iranian leaders that inflation, unemployment and trade disruptions have become major problems shows the scale of the challenge facing the country’s economy.

With foreign trade down sharply and inflation remaining extremely high, Iran’s economic stability is increasingly tied to what happens next on the battlefield, in international negotiations and around one of the world’s most important energy waterways.