A United States naval blockade on Iran is strangling the Islamic Republic’s main economic corridors – leaving Tehran facing a looming oil storage crisis and its citizens grappling with rising food prices and surging unemployment.
Yet unless Washington is prepared to impose its naval blockade for months longer, it will be difficult to completely dismantle an Iranian economy that has spent years adapting to US pressure and crippling sanctions.
And as much as Iran is suffering, its leaders will be aware that Trump is under pressure too, with the US president facing growing backlash over the war domestically and crucial midterms looming. Tehran may have calculated that Trump will blink first.
Only three months ago, the Iranian government was on the brink of collapse after people took to the streets nationwide to protest the poor handling of the economy. That same government was given a lifeline when the US and Israel launched its attacks, and it is now using the pretext of war to justify dire economic conditions to a nation of 92 million.
“Iran had already faced the maximum pressure campaign in Trump’s first term, and it was forced to cut its oil production by half,” Esfandyar Batmanghelidj, CEO of the think-tank Borse and Bazaar, told CNN.
“If the blockade is in place for months, it will definitely impact the economic outlook for Iran, but the Iranian expectation is that the US itself cannot tolerate that pressure for that long.”
What began as a blockade of Iranian ports more than ten days ago has expanded globally, with every ship tied to Iran facing scrutinous monitoring by US naval forces throughout its voyage.
One of the main outcomes of the blockade would be to render Iran incapable of exporting its main commodity. If the country cannot shift the millions of barrels of oil it produces daily, it could be forced to cut production. Crude oil and petroleum product exports are Iran’s primary source of foreign currency.
Iran could probably sustain current oil production for another two to three months before storage issues become “a significant consideration,” Batmanghelidj said.
Iran also still has plenty of oil storage space remaining onshore, shipping analytics firm Kpler said, noting it has almost 30 million barrels of headroom, which means it’s still weeks away from its limit.
It could even push storage capacity longer if it finds other methods of offloading the stored oil.
One option Iran is exploring is using its retired crude tankers. A 30-year-old large carrier called NASHA was observed sailing towards oil storage terminals on Kharg island to possibly offload oil and act as floating storage, a maritime intelligence company that tracks crude oil shipments Tankertrackers.com said.
Until a ceasefire was declared on April 7, the US and Israel had been conducting near-daily strikes on Iran, killing top officials and targeting core infrastructure including steel plants, petrochemical facilities and highways linking cities together.
For much of the war, a key US goal was reopening the critical Strait of Hormuz. But when Iranian negotiators failed to reach an agreement with American counterparts this month, President Donald Trump switched tactic, launching what his Defense Secretary Pete Hegseth called an “iron-clad” naval blockade on Iran from the Gulf of Oman to the “open oceans.”
“To the regime in Tehran, the blockade is tightening by the hour. We are in control. Nothing in. Nothing out,” Hegseth told a news conference Friday.
The US move came in response to Tehran’s decision to block the Strait of Hormuz and impose an unofficial toll on ships passing through this critical maritime chokepoint, which facilitates more than a fifth of the world’s oil and gas exports, causing oil prices to surge sharply.
“The Strait cannot operate under threat. And let’s call payment for safe passage what it is: A protection racket. Hormuz belongs to the world. It must be returned to the world. Exactly as it was,” Sultan Al Jaber, the CEO of Abu Dhabi’s state oil giant ADNOC, said on X last week.
Southern Iran is the backbone of the country’s trade and economy, handling the vast majority of its oil exports through terminals. While Iran has land borders for some overland trade, nothing compares to the southern coastline. Kharg Island alone exports around 90% of Iran’s crude while other locations dotted along the coastline give Iran options to ship its oil beyond the Strait of Hormuz.
The ongoing US naval blockade heavily restricts these southern terminals even beyond the Strait of Hormuz.
War with Iran has also threatened the world’s supplies of aluminum, plastics and rubber. The Middle East ships about 25% of the world’s polypropylene and 20% of polyethylene, two of the most-used plastics. It also accounts for a quarter of the world’s sulphur and 15% of its fertilizer.
Vessels coming from or going to Iranian ports have been turned around, Hegseth said, noting 34 vessels had been intercepted in the region as of Friday, with two other Iranian-linked ships seized in the Indo-Pacific. In public, at least, the US stresses it won’t back down.
“A blockade as long as it takes, whatever President Trump decides,” Hegseth said.
Should Iran be compelled to turn to alternative import routes, such as its land borders or the Caspian Sea to the north, this could push the already escalating prices of goods even higher.
One million jobs have already been lost in Iran, and the employment of two million people has been affected because of the war, state-affiliated media said, citing Iran’s deputy labor minister, Gholamhossein Mohammadi.
Another 130,000 workers have lost their jobs after their factories were struck, Iran’s Labor Ministry official Alireza Mahjoub told the Iranian Labour News Agency (ILNA).
The Iranian government has maintained that there are no shortages of goods and that, despite “pressures, sanctions, and maritime restrictions,” the country’s food supply chain is fully functioning with 85% of agricultural products and basic goods produced domestically.
A Tehran resident confirmed to CNN that markets remain stocked, although prices of basic goods such as chicken, rice, eggs and medicine have tripled or even quadrupled.
But while many US voters have been alarmed at rising gas prices, Iranians are more accustomed to such hardships.
“For Iran’s leadership the goal during war is not to run a normal economy,” Batmanghelidj said. “The goal is just to keep the economic machine going as well as possible for as long as possible and I think they can probably manage that.”
The country’s president, Masoud Pezeshkian, acknowledged that there are some shortages in fuel that require “careful planning” and “public cooperation,” but described what the government has achieved as “divine grace.”
Iran’s new Supreme Leader Mojtaba Khamenei, who has not been seen or heard from since his appointment last month, called on people in a written statement “to be considerate of one another so that the pressures caused by shortages – which are a natural effect of any war – are reduced on different segments of society.”
This weekend has seen tentative signs of movement on talks, with US envoys expected to follow Iran’s top diplomat to Pakistan, where mediators are keen to restart negotiations. But Tehran has weathered decades of US hostility and unlike Washington – has more than short-term considerations at play.
