Inflation, unemployment and disputes at the top of the regime: The economic crisis in Iran that Donald Trump is betting on
Iran is hardening its positions and demanding additional concessions from the US, but at the same time is suffering from a severe economic crisis that affects both the regime and tens of millions of its citizens.
Donald Trump believes that heavy economic pressure on Iran will force a change in its policy. The American naval blockade in the Strait of Hormuz has almost completely paralyzed oil exports. According to Donald Trump, the Iranian regime lacks the funds to pay its soldiers. The head of the Central Bank has warned that food and medicine stocks will be depleted by the end of August. Annual inflation in Iran has reached 69% according to the International Monetary Fund, and President Masoud Pezeshkian has warned of potential public unrest and threatened to resign.
In an interview with Channel 12 on Sunday, US President Donald Trump clarified that he is betting on the effectiveness of economic pressure. He highlighted soaring inflation, the inability to pay salaries, and the US naval blockade as factors weighing heavily on Tehran's fragile economy. Despite the regime's hardening stance and hawkish rhetoric toward the US, senior officials within the Ayatollah's regime are warning of a severe crisis if the current situation persists.
The US naval blockade, renewed in late July following disruptions in the Strait of Hormuz by the Revolutionary Guards, is taking a heavy toll. By preventing ships from entering or exiting through the strait, the US has paralyzed Iran's oil industry, the regime's primary source of income. The Financial Times reported over the weekend that oil sales have come to a near-total halt. Satellite imagery of Kharg Island, which handles about 90% of the country's oil exports, shows no tanker loadings for the past week. Tehran has also begun reducing production at its oil fields due to a lack of storage capacity.
The economic crisis is also hitting tens of millions of citizens. The International Monetary Fund (IMF) predicts that Iran's economy will shrink by 6% in 2026. Ordinary Iranians are grappling with fuel shortages and other scarcities. According to the Statistical Center of Iran, food price inflation has risen by 128% compared to the same period last year. The unemployment rate has climbed from 7.3% to 9.1%, with 450,000 people losing their jobs in the past year, particularly among the youth and women.
These conditions are fueling sharp disputes within the Iranian leadership. The New York Times revealed that the head of the Central Bank wrote to Supreme Leader Mojtaba Khamenei warning of an acute budget crisis. President Masoud Pezeshkian has also reportedly warned Khamenei in a direct meeting that the economic situation is dire, even threatening to resign. Kazem Gharibabadi, Deputy Foreign Minister and a senior negotiator, recently told IRIB that the economy is in desperate need of sanctions relief through a diplomatic agreement, questioning the realism of those who oppose such negotiations.
