Iran’s worsening economic crisis raises questions over Tehran’s willingness to compromise

Long lines of vehicles waiting to refuel in Iran are offering a visible sign of an economic crisis that has become one of the country’s most severe in decades. The rial has fallen below 2 million to the US dollar on the open market, while inflation, trade disruptions and declining oil exports weigh on daily life.

Iranian President Masoud Pezeshkian has acknowledged the scale of the pressure, saying US sanctions and disruptions to maritime trade have reduced the country’s foreign trade by about 35%. The World Bank estimates that Iran’s economy contracted by 2.7% during the fiscal year that ended in March 2026 and has warned that the current conflict could cause further damage.

Inflation is the most immediate concern, according to Raz Zimmt, director of the Iran and Shi’ite Axis Program at the Institute for National Security Studies. “The main problem is inflation,” Zimmt told The Jerusalem Post. He said the official rate exceeded 80%, while prices for basic goods, especially food, had risen by 120% to 180%.

The United States blockade is adding to Tehran’s financial strain by disrupting oil and other exports. Iran has long used tankers known as the shadow fleet, intermediaries and sales primarily to China to keep crude moving despite US and European sanctions. But reported exports fell to about 220,000-255,000 barrels per day in August, from roughly 2 million barrels per day in March.

That decline is reducing Iran’s access to foreign currency just as its need grows. Tehran has tried to bypass the pressure through offshore storage, ship-to-ship transfers, barter deals, alternative trade networks and non-dollar transactions. Those channels are becoming harder to operate as Washington expands sanctions and targets Iran’s financial and banking systems through its “D-Day” campaign. US Treasury Secretary Scott Bessent has warned that countries helping Tehran obtain foreign currency will face sanctions and severe penalties.

Despite the worsening conditions, Zimmt said the regime was not close to collapse.

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The main problem is inflation. The official inflation rate is more than 80%. But what is even more interesting is the price of basic goods, particularly food, which has increased by between 120% and 180%.