Already worn down by years of sanctions and brutal military attacks by the United States and Israel, Iran faces new challenges as President Donald Trump moves to further tighten the economic stranglehold on the Islamic republic.
As negotiations to end the six-month war stall and Iran continues to inflict global economic pain by blocking shipping through the vital Strait of Hormuz, the United States is preparing to unveil what Treasury Secretary Scott Bessent promises will be the “toughest sanctions in history” at a news conference later on Monday.
As Iranian government officials have acknowledged, the Iranian people are suffering.
“I am sorry that these problems exist at a time when we are facing a full-scale economic, military and security war,” Iranian President Masoud Pezeshkian said, according to state media.
He added: “As a government, we are committed to fighting inflation, public affairs, people’s lives, people’s jobs, people’s future and people’s lives in a direction of dignity and pride.”
Videos on social media released last week showed empty markets in Tehran and Karaj, with vendors complaining that fresh produce was not being bought. One Tehran resident and another business owner told CNN that economic pressures have become “unbearable.”
Nima, 36, who lives in Tehran, told CNN that not only is everything expensive, but some “important things that we need, such as certain medicines,” are not even available.
A small shop owner, who chose anonymity to speak freely about his financial situation, said he was barely scraping by.
“Some foreign products, such as foreign shampoos, conditioners and toothpaste, are becoming scarce. Stocks are limited and even products made in Iran, which are now too expensive for most people, have had to increase prices,” he said.
But even with new economic pressures, experts say unless the Trump administration finds new ways to cut off revenue streams for the Iranian government, Washington will once again be faced with a regime that has been evading sanctions for years, deftly finding ways to generate new revenue, and betting on its ability to weather U.S. economic pressures.
During decades of international pariah status, the Islamic Republic was forced to develop sophisticated ways to reduce the impact of Western sanctions, building a decentralized network of front companies, brokers, exchanges, and a shadowy fleet of tankers that use ship-to-ship transfers, falsified tracking data, and false documents to transport oil.
The US Financial Crimes Enforcement Network announced that $9 billion worth of Iranian shadow banking activity was conducted through US correspondent accounts in 2024, based on reports from US financial institutions. The oil, shipping and investment shell companies facilitate billions of dollars of trade through networks spanning the United Arab Emirates, Hong Kong and Singapore, according to the Treasury Department.
Umud Shoukri, an energy strategist and senior visiting fellow at George Mason University, told CNN that payments are often made outside the Chinese yuan, barter transactions, or dollar-based banking systems.
Bessent told CNBC in a recent interview that the move would “crush” the economy of “this murderous regime” and curb Iran’s ability to “project power through proxies” and pay its military.
But experts said ordinary Iranians were likely to bear the brunt of the new sanctions.
“Ordinary Iranians will experience immediate pain. Further sanctions will lead to a weaker rial, higher inflation, higher prices for imported goods and industrial materials, and a reduction in household purchasing power,” Shokri said.
Salary earners, pensioners, small businesses and low-income households will be particularly vulnerable, he added, even if public and military spending, as well as regional allies, are hit under tough new economic sanctions.
Shokri said “politically connected” institutions and intermediaries will be partially “isolated” as they continue to profit from smuggling, currency manipulation and control of scarce imports.
Experts say that for the United States to effectively target Iran’s economy, it would need to target major Chinese buyers of Iranian oil, independent refineries and banks that process Iranian profits, which could risk retaliation from Beijing against Washington.
In a post on Truth Social, Trump threatened that other countries would have “immeasurable economic consequences” if they provided Iran with any kind of “lifeline,” without naming any specific countries.
“Rather than continuing to impose sanctions on substitute ships and shell companies, the United States will have to target central nodes of Iranian trade,” Shokri said, adding that the United States could aim to impose sanctions on tanker operators, insurance companies, ports and ship-to-ship transfer companies, while tightening restrictions on technology that could ultimately be dual-use for the military.
While the Iranian government has expanded domestic production while operating a sophisticated network of front companies to source essential goods primarily from China, the Islamic Republic has proven it can shift the burden of sanctions onto its already struggling population while protecting institutions essential to the regime’s survival.
Weeks before the war, Iranians took to the streets to protest rising prices and inflation.
But after initially acknowledging the economic struggle, the government again accused the protesters of being foreign agents before launching the worst crackdown in the Islamic republic’s history.
For now, the Iranian regime is using the war to justify its dire economic situation, giving a once-beleaguered government excuses to a weary population, while President Trump is likely under greater political pressure from American consumers angry about gas prices ahead of the midterm elections.
“They’re willing to weather the storm, they’re willing to weather the pain,” Dina Esfandiary, head of Middle East geoeconomics at Bloomberg Economics, told CNN. “None of the steps President Trump is considering will force Iran to surrender.”
Esfandiari says what is needed is “diplomacy and carrots” with Iran, which “of course is not on the table at all.”
For now, Neda, a 34-year-old resident of Tehran who is battling kidney disease and needs medication, is once again holding her breath as she is forced to buy only half of her monthly doses.
“I’m always so anxious because I really can’t live without my medication,” she said. “I went to the doctor the other day and the nurse said that no one even shows up for dialysis appointments.”
“People who are undergoing chemotherapy have stopped going because they can no longer afford the treatment.”
