The United States government announced plans on Friday to increase economic pressure on Iran, with Treasury Secretary Scott Bessent stating that Washington would implement new measures as early as next week. The announcement comes after six months of conflict involving U.S. and Israeli military strikes on Iranian infrastructure, including factories and power plants. While Iranian leaders have projected resilience and effectively closed the Strait of Hormuz, officials within the country expressed concern to Reuters that further sanctions could exacerbate domestic economic hardship and lead to civil unrest.
Iran entered the current conflict already facing high inflation, a weakening currency, and existing sanctions. The war has since damaged critical transport networks and factories, leading to project cancellations and job losses in the construction and trade sectors. President Masoud Pezeshkian acknowledged last week that national income has fallen while costs have multiplied due to the destruction of businesses and a reduction in oil sales.
Economic data from Iran’s Statistical Centre shows the annual inflation rate reached 66% in July, with food inflation at 128% year-on-year. Although the government raised the minimum wage by 60% this year, the depreciation of the rial has caused the dollar value of that wage to drop from $105 to $86 since late March. In Tehran, housing prices are reportedly 50% higher than last year, and meat and poultry have become unaffordable for many households.
To manage internal stability, Iranian authorities recently appointed Hossein Taeb to lead the Basij militia, a paramilitary group used to manage protests. Rights groups report that the government has also increased the use of executions, arrests, and prison sentences for activists and students. These actions follow the suppression of nationwide economic protests in January, during which thousands of people were killed by security forces.
Small-business owners and professionals are facing a collapse in operations and income. In port cities like Bandar Abbas, import-export businesses have shuttered due to regional instability, leading to immediate layoffs. For the roughly 7 million people who rely on government or engineering sectors, like those cited in Isfahan, the combination of infrastructure damage and sanctions means long-term projects are stalled, leaving workers to seek irregular tutoring or low-wage work. The gasoline shortage is also acute, with daily consumption of 137 million liters outstripping the maximum production capacity of 130 million liters, potentially affecting transit and daily commutes for millions.
The broader impact involves a significant disruption to global energy and trade markets. The closure of the Strait of Hormuz affects a vital route for global oil supplies, while the U.S. naval blockade has forced Iran to use more expensive land corridors and Caspian Sea routes. This shift increases the final cost of all imported goods. What happens next depends on the specific details of the U.S. measures expected next week and the Iranian government's response to potential renewed protests, following the precedent of the January crackdown.