Iran braces for deeper economic crisis as Trump threatens new sanctions

Iran’s leadership is facing mounting economic pressure as US President Donald Trump threatens new sanctions on Tehran, amid fears that US measures could deepen the country’s economic crisis, reignite protests, and further undermine the regime’s legitimacy, despite official claims of resilience in the ongoing standoff with the United States.

On Friday, Trump pledged to impose tough new economic measures on Iran, a day after US Treasury Secretary Scott Besant announced that Washington would introduce “unprecedented” actions against Tehran next week, without revealing details.

Three Iranian officials—including two sources familiar with political affairs and a former official—said internal pressure on the leadership is intensifying, potentially paving the way for fresh, widespread unrest, even as authorities insist they can withstand the nearly six-month conflict and have effectively closed the Strait of Hormuz.

The officials and dozens of Iranians spoke to Reuters on condition of anonymity, either out of fear of retaliation or because they were not authorized to speak to the media.

Iran entered the conflict already grappling with high inflation, a depreciating currency, energy shortages, economic sanctions, and deep structural problems. The war has added further damage to infrastructure, disrupted trade, reduced production, and increased the costs of reconstruction.

Iran’s economy under wartime strain

The war’s impact is being felt directly by ordinary Iranians. Construction projects have halted across large areas, job opportunities have declined, and rising material costs and weak recovery prospects have further complicated the economic situation.

Arshia, a civil engineer from Isfahan with a decade of experience in construction, said the war has led to projects being stopped or delayed, making it difficult for him to find work.

He added that new US sanctions would only worsen people’s suffering, noting that Iranians are already facing severe economic hardship.

US strikes have damaged factories, power plants, transport networks, and other vital facilities, increasing pressure on an economy already struggling before the war launched by the United States and Israel against Iran on February 28.

In the southern city of Bandar Abbas, 53-year-old Mohsen was forced to close his small import-export business with Gulf countries after military developments disrupted his operations.

He said he had to lay off ten employees because he could no longer pay their salaries and now relies on his savings to support his family.

Inflation tops 60%

Official data shows Iran’s cost-of-living crisis is worsening. The Iranian Statistical Center reported annual inflation reached 66% in July, with consumer prices up 87.9% year-on-year and food inflation soaring to 128%.

Iranian officials believe the greatest threat to the leadership is not just economic pressure, but the risk that it could spark new popular protests.

The appointment last week of Hossein Taeb—linked to previous protest crackdowns—to lead the Basij forces is seen as a sign of growing official concern over renewed unrest.

The Basij, a volunteer paramilitary force under the Islamic Revolutionary Guard Corps, has been used alongside the IRGC to quell past protests.

In recent years, Iran has witnessed widespread protests, some driven by economic grievances. Rights groups say authorities have stepped up executions, arrests, summonses, and prison sentences against journalists, lawyers, activists, and students in recent months to prevent further unrest.

Authorities say such measures are necessary to maintain stability during wartime, while critics argue they risk widening the gap between the religious establishment and the public amid mounting economic pressure.

Falling purchasing power squeezes families

Mounting pressure has forced Iranian families to cut back on meat and basic foodstuffs, turning to cheaper alternatives.

Hossein, a government employee in Yazd, said his salary runs out within days and that meat and chicken have disappeared from his family’s table as daily expenses become harder to manage.

Housing costs have also surged. Data from the Iranian Statistical Center shows rents rose 31% year-on-year in March, while state media reported housing prices in Tehran jumped about 50% from a year earlier.

Although authorities raised the minimum wage by about 60% this year, the continued decline of the rial has eroded purchasing power. The minimum wage in dollar terms has fallen from around $105 to $86 since late March.

Workers’ struggles reflect the scale of the crisis. Bijan, 40, switched from engineering to online tutoring and moved with his wife from Tehran to a cheaper province after finding it increasingly difficult to cover the family’s monthly needs—about $400.

He said most of his time is now spent working, searching for new opportunities, and worrying about the lack of steady employment.

Alternative transport routes drive up import costs

Iran is trying to maintain the flow of essential goods via alternative routes, including overland corridors and the Caspian Sea, but these also face growing challenges.

Damaged bridges have disrupted some land transport routes, increasing the time and cost of moving goods within the country.

President Masoud Pezeshkian has acknowledged the severity of the pressure, noting that problems have multiplied and revenues have fallen.

He explained that goods once shipped by sea now take longer routes, raising prices, while oil sales and tax revenues from struggling companies have declined.

Fuel market pressures have also intensified. Parliamentary deputy Reza Sabafand said the blockade has effectively halted gasoline imports, with domestic production at about 130 million liters per day, compared to consumption of 137 million liters.