Iranian economic collapse may come too late for Trump
DUBAI -- Weeks of conflict have aggravated Iran’s dire economic problems, risking calamity after the war, but the Islamic Republic looks able to survive a standoff in the Gulf for now, despite a U.S. blockade that has cut off energy exports.
With major fighting paused by an April 8 truce, Iran is locked in a stalemate with the U.S. and Israel, with talks for a lasting ceasefire stalled while Tehran keeps the Strait of Hormuz shut and Washington blockades Iranian Gulf ports.
Despite bad damage to infrastructure and industries and an oil-export squeeze, Iran has plentiful internal supplies, steady trade with neighbors and only limited signs of immediate stress from state-revenue losses caused by the blockade.
If U.S. President Donald Trump expects Iran to blink first in their game of economic chicken, with global inflation rising and midterm elections approaching, he may be waiting a while.
Resistance economy
“I think that they have calculated a longer runway than I think economists or Western policymakers are anticipating,” said Sanam Vakil, head of the Middle East program at the Chatham House thinktank in London, referring to Iran’s leaders.
Facing what they see as an existential threat to the Islamic Republic, Iran’s ruling clerics and Revolutionary Guards are able to use their iron grip on the country to hold out for a sustainable deal from Washington, Vakil said.
“They are quite known to use repressive capacity. They’re relying on people using their savings,” she said, adding that Tehran was falling back on its “resistance economy” approach of relying on internal resources and trading across land borders.
The extent of economic damage from the war - and the likelihood of imminent economic crisis - are hard to gauge given the lack of reliable official data and a partial internet blackout since January.
However, Reuters reported this month that the situation was so bad that Iranian officials feared new rounds of protests and the country faced disaster unless sanctions were lifted.
Vakil said she anticipated a double-digit drop in Iran’s GDP this year. The rial currency, which fell by 70% last year, worsening inflation that contributed to mass protests in January, has dropped by 15% over recent days, but after stabilizing through March is not far off its pre-war value.
There are few other indications of immediate fiscal stress. The authorities have not curbed bank withdrawals, rationed fuel or food staples or delayed state-salary payments. Supermarket shelves remain full and offices and banks have stayed open.
Shipping data from April 13 to 25 showed only around 300,000 barrels of oil per day moved out into the Indian Ocean from over 1 million bpd loaded onto tankers during that period. Storage capacity is limited but energy analysts believe Iran may be able to go another two months before curbing production.
Iran built up extra revenue through energy sales when sanctions were waived earlier in the war. Limited volumes of oil are being shipped overland, but not enough to replicate the blockaded sea routes.
A senior source at Iran’s Central Bank told Reuters the country had substantial gold reserves, “tons of it”, that it could deploy if needed and that after decades of evading sanctions, Tehran knew how to maintain imports by paying a little more.
“Iran is the largest food importer in the region. But it is also important to note that Iran is the least food-insecure country in the region,” said Ishan Bahnu, head agricultural commodities analyst at Kpler.
With an expected better-than-usual harvest approaching, the need for wheat imports is reduced, Bahnu said, reducing vulnerability to any extension of the maritime blockade to grain shipments and putting off some foreign currency spending.
The U.S. blockade has so far been limited to Gulf ports, not Iran’s Chabahar on the Arabian Sea, and has focused on oil tankers, Bahnu said, citing monitored vessel movements.
Officials in Turkey, Iraq and Pakistan told Reuters there was no indication of a slump in cross-border trade yet. Russia has also boosted trade across the Caspian this year, shipping 500,000 tons of corn, 180,000 tons of barley and 4,000 tons of wheat across the inland sea from January to March, according to Russian agriculture ministry data, bypassing blockaded Gulf ports.
Intense economic pain
As Trump’s threats of military action increased in January, Iran increased imports to stockpile six months’ worth of essentials, the parliament’s agriculture commission head Mohammad Javad Asgari said in state media this month.
Soon after the conflict began, the Central Bank introduced a support package waiving penalties for late payments of small loans and raised bank withdrawal limits to reassure depositors.
Still, on the streets of Tehran, the economic pain is intense. Iranian businesses have been crushed by high prices, supply chain disruption and the internet blackout, causing spiralling unemployment.
“Rising prices of basic goods, especially products like ours that are directly linked to people’s tables definitely put pressure on people,” said Abbas Smaeelzade, a rice and grain salesman. Smaeelzade estimated that his sales had fallen by around 40% since the war began.
Mechanic Hossein Amiri said far fewer customers were bringing cars to his workshop compared to before the war. “Our business has basically come to a standstill,” he said, warning that things could get far worse.
Hanging over the authorities is the fear of another round of mass protests. January’s unrest was only quashed by killing thousands of demonstrators in the biggest bout of bloodletting for decades.
To avert the impending economic disaster, Iran would need to include sanctions relief in any deal with Washington, Vakil said. “They do need access to their foreign currency abroad that is housed in banks around the world, but also a degree of sanctions relief. They need to ramp up oil sales, but also be able to trade properly,” she said.
Other daily developments in Middle East
▪ On Thursday, Iran’s new supreme leader Mojtaba Khamenei also cast doubt on the likelihood of a deal, giving a rare statement in which he vowed not to give up the country’s nuclear or missile technologies. He also signaled Tehran would keep control of the Strait of Hormuz.
Iranian President Masoud Pezeshkian said in a social media post that he considered the U.S. naval blockade an “extension of military operations,” and that it was “intolerable.”
U.S. Central Command, which oversees American forces in the Middle East, has prepared a plan for a short wave of strikes to break the negotiating deadlock, Axios said.
“Trump wants to end the Iran war, but not on the terms proposed by Tehran,” said Becca Wasser and Chris Kennedy, analysts at
Bloomberg Economics. “That suggests the question is no longer whether he escalates to push for a better offer, but when and how. We think the most likely window for action is within the next two weeks, and that renewed U.S. strikes are the most likely course.”
▪ Defense Secretary Pete Hegseth sparred with lawmakers on Capitol Hill as Democrats stressed the Iran war was nearing the 60-day threshold that triggers a requirement, per the War Powers Act, of Congressional authorization for any further action.
Hegseth suggested that the tenuous cease-fire currently in effect pauses the 60-day clock that presidents can wage war without authorization from Congress.
UPI.com reported that Hegseth told the Senate Armed Services Committee that it could take “months and years” to replace U.S. munitions used during the war. He said that he is aware of concerns about the country’s weapons stockpile after nearly two months of fighting.
Democrats also blasted Hegseth and other senior Pentagon officials over a cost estimate for the war — $25 billion — that one U.S. senator said was “probably less than half, maybe less than a quarter, of the total cost of war.”
▪ The United States on Thursday pressed for direct high-level talks between Israel and Lebanon amid the fragile ceasefire between Israel and the pro-Iranian Hezbollah militia.
“Lebanon stands at a crossroads. Its people have a historic opportunity to reclaim their country and shape their future as a truly sovereign, independent nation,” the US embassy in Beirut said in a statement posted on X.
Trump announced the ceasefire in mid-April after talks with Israeli Prime Minister Benjamin Netanyahu and Lebanese President Joseph Aoun. However, mutual attacks between the Israeli military and Hezbollah continue. Israeli troops also remain stationed in southern Lebanon.
Lebanon is not formally considered a party to the conflict and has no direct control over Hezbollah.
▪ Trump invited Iraq’s prime minister nominee to visit Washington after he forms a new government, as the U.S. seeks to limit Iran’s influence on its neighbor.
In a telephone call, Trump and Ali al-Zaidi discussed “ways to develop and strengthen” bilateral relations between the U.S. and Iraq in various fields, according to a statement from the Iraqi premier’s office. They also agreed to cooperate to consolidate stability in the region.
Iraq’s largest Shiite bloc, the Coordination Framework, nominated al-Zaidi to be the next prime minister after Nouri Al-Maliki, who held the position between 2006 and 2014, withdrew his bid for another tenure.
The candidacy of Al-Maliki, who boasts close ties with Iran, alarmed Washington, as Trump stressed that his return would cause a rift between the U.S. and Iraq — OPEC’s second-largest producer. The American president, in a post on Truth Social on Thursday, wished al-Zaidi “success as he works to form a new Government free from terrorism that could deliver a brighter future for Iraq.”
“We look forward to a strong, vibrant, and highly productive new relationship between Iraq and the United States. This is the beginning of a tremendous new chapter between our Nations — Prosperity, Stability, and Success like never seen before,” Trump said.
A former banker and businessman with no political background, al-Zaidi is poised to succeed the incumbent, Mohammed Shia Al-Sudani, who has good relations with the U.S. yet opted not to try for another term.
An alliance of parties led by Al-Sudani won the most votes in the November elections, but not enough to form a government on its own. Al-Zaidi has a month to submit his government to the Iraqi Parliament for approval.
Under the country’s power-sharing arrangements, the most important post of prime minister should be given to a Shiite, with Sunnis and Kurds choosing the parliament speaker and president, respectively.
▪ The Israeli navy has intercepted more than 20 vessels from an international aid flotilla bound for Gaza off the coast of the Greek island of Crete and detained dozens of activists, authorities said on Thursday.
The Israeli Foreign Ministry said around 175 activists were being transported to Israel “peacefully.”
Meanwhile, the group calling itself the “Global Sumud Flotilla” described the operation in a post on X as “a violent raid in international waters.”
The group alleged that naval forces boarded multiple boats, “smashing engines” and “intentionally leaving hundreds of civilians stranded on powerless, broken vessels” as a storm approached. Communications were also reportedly disrupted.
The interception took place west of Crete, roughly 620 miles from Israel. While an intervention had been anticipated, the timing and location reportedly came as a surprise. Israeli media said the flotilla was stopped early due to its size.
Activists said Israeli speedboats approached the flotilla at night, with soldiers allegedly pointing lasers and semi-automatic weapons at the vessels. People onboard were reportedly ordered to assemble at the bow and kneel.
Dozens of vessels carrying activists from multiple countries set sail from Sicily on Sunday toward the Gaza Strip in what organizers described as the largest flotilla yet attempting to reach the coastal enclave.
The activists aim to challenge Israel’s naval blockade of Gaza, in place since 2007 and supported by Egypt, and to deliver humanitarian supplies to the territory. They also say they are seeking to push for the establishment of a permanent humanitarian corridor.
Additional reporting by Sarah el-Sefty in Cairo. Bloomberg News and German press agency dpa contributed to this report.
Copyright Reuters or USA Today Network via Reuters Connect.
This story was originally published April 30, 2026 at 11:45 AM.