Iran is confronting a deepening economic crisis as the prolonged conflict with the United States, intensified sanctions and restrictions on maritime trade continue to put pressure on the country’s economy.

Iranian President Masoud Pezeshkian said foreign exports and imports had fallen by nearly 35% because of US sanctions and the blockade of Iranian ports. The government has acknowledged that controlling inflation, stabilising markets and protecting employment have become urgent economic priorities.

Trade Comes Under Severe Pressure

Foreign trade has become one of the most vulnerable areas of Iran’s economy.

The restrictions on Iranian ports and the disruption of shipping routes have made it harder for businesses to move goods in and out of the country. Reduced trade also threatens the availability of foreign currency, which Iran needs to pay for imports and support international transactions.

Pezeshkian’s estimate of a roughly 35% decline in exports and imports illustrates the scale of the disruption facing Iranian businesses.

Inflation Hits Households

The economic strain is being felt directly by ordinary households.

Annual inflation was reported at around 66% in July, while other Iranian and international estimates have produced different figures depending on the methodology and period measured. The sharp rise in prices has reduced household purchasing power and made everyday necessities increasingly expensive.

The Iranian rial has also suffered a dramatic decline. On the free market, the currency recently fell beyond 2 million rials per US dollar, a historic low that has further increased the cost of imported products.

Food and Medicine Become More Expensive

Currency depreciation and supply disruptions are creating additional difficulties for consumers.

Recent reporting found substantial increases in the prices of food products and medicines. Cooking oil, chicken and tomatoes have all become significantly more expensive, while some essential medicines have experienced particularly sharp price increases.

For families with limited incomes, the combination of higher food prices, weaker purchasing power and uncertain employment is creating pressure on household budgets.

Oil Revenue Faces New Obstacles

Oil remains a crucial source of foreign currency for Iran, but the conflict and sanctions have made exports increasingly difficult.

Iran’s central bank governor recently acknowledged restrictions on oil exports, while international reports indicate that shipments to major buyers have faced increasing pressure. China remains particularly important to Iran’s oil trade, making Beijing’s response to Washington’s sanctions strategy a major factor in Tehran’s economic outlook.

A prolonged reduction in oil revenue could make it more difficult for the Iranian government to finance imports and support domestic economic activity.

Washington Intensifies Economic Pressure

The United States has moved toward a broader sanctions strategy designed to restrict Iran’s remaining international financial and commercial channels.

Washington has warned companies and countries conducting business with Iran that they could face secondary sanctions. The strategy is intended to discourage international partners from helping Tehran maintain its trade networks.

Recent US measures have targeted financial institutions and entities connected to Iranian commerce, increasing uncertainty for businesses dealing with the country.

Government Promises Economic Measures

Despite the worsening conditions, Tehran says it intends to maintain domestic economic activity and reduce its vulnerability to foreign pressure.

Iranian authorities have identified several priorities, including reducing inflation, supporting employment, stabilising prices, increasing domestic production and gradually reducing dependence on the US dollar.

The government is also emphasising domestic production and alternative trading relationships as ways of reducing the impact of sanctions.

Strait of Hormuz Adds Global Risk

The economic crisis is closely connected to the wider dispute surrounding the Strait of Hormuz, one of the world’s most important energy shipping routes.

Iran has continued to assert its control over the strategic waterway, while the United States maintains pressure on Iranian maritime activity. Any prolonged disruption could have consequences beyond Iran by affecting global energy supplies and transportation costs.

The uncertainty surrounding the waterway therefore represents both an Iranian economic problem and a potential international energy-market risk.

China’s Role Could Be Crucial

Iran’s ability to maintain economic links with major trading partners could determine how severely the latest sanctions affect the country.

China is Iran’s most important oil buyer and a major trading partner. Iran has also relied on regional and alternative trade networks to maintain economic activity despite decades of sanctions.

If major trading partners continue purchasing Iranian products and providing alternative channels for commerce, Tehran may be able to reduce some of the effects of Western restrictions. However, tighter secondary sanctions could make those transactions more complicated and expensive.

Economic Outlook Remains Difficult

The International Monetary Fund projected that Iran’s real economy could contract by 5.4% in 2026, according to figures cited in recent assessments. The outlook assumes significant economic disruption from the conflict and related restrictions.

The combination of economic contraction, high inflation, currency depreciation and weaker international trade creates a difficult environment for businesses and consumers.

Iran has previously demonstrated an ability to adapt to sanctions through domestic production, informal trade networks and alternative financial arrangements. However, the current crisis is testing how much pressure those mechanisms can absorb.

A Critical Economic Test for Tehran

Iran’s leaders are now attempting to balance two competing priorities: resisting external pressure while preventing further deterioration in living standards.

The government has indicated that it wants diplomacy to remain possible, but Tehran has simultaneously maintained its broader strategic positions.

For ordinary Iranians, however, the immediate concern is economic rather than geopolitical. Rising prices, a weakening currency and reduced employment opportunities are affecting household finances across the country.

The coming months will show whether Iran can stabilise its currency, restore trade flows and control inflation—or whether continued sanctions and conflict will push the economy into an even deeper downturn.