Iran's economy: the blockade bites harder than the snapback

When Britain, France and Germany restored UN sanctions on Iran in September 2025, the debate was about whether the measures were legal and whether anyone outside Europe would enforce them. Ten months later that debate looks secondary. The decisive pressure on Iran's economy in 2026 has come from war, which began on 28 February, and from a US naval blockade of Iranian ports. The figures show an economy that has not collapsed but is paying through its households and its oil in storage.

What the snapback did and did not change

The E3 said they triggered the snapback because of what they called Iran's 'persistent and significant nonperformance' of its nuclear commitments. The UN measures lifted under the 2015 deal came back into force at the end of September 2025. Tehran rejected them outright. Foreign Minister Abbas Araghchi called the European notification 'legally and procedurally flawed and therefore null and void', and President Masoud Pezeshkian called the sanctions illegal. Russia's foreign ministry spokeswoman described the European move as legally invalid; China's foreign ministry said it was not constructive.

That split matters for the economy. Russia rejects the measures and China opposed them, and both remain Iran's important partners, so the snapback added little to the pressure US secondary sanctions already applied. Its effect was mainly legal: it gave governments, banks and insurers that follow UN listings a firmer basis for staying away, and weakened Iran's argument that the restrictions were purely unilateral. It did not, on its own, cut the flow of barrels.

Oil: from exports to floating storage

The blockade did. Al Jazeera, drawing on tanker-tracking data, reported that Iran's crude exports fell from nearly 2 million barrels a day to under 300,000 in May, after US enforcement began on 13 April. Its estimate of daily oil revenue fell from about $165.6m in March to about $27m in May, a loss of $5.8bn over April and May against the March rate. Production did not stop. By early June about 147 million barrels were held in floating storage, roughly 67 million of them inside the Gulf and unable to leave.

The blockade was lifted in June, around an interim US–Iranian agreement signed on 17 June. It did not last. After the ceasefire broke down in early July, with each side blaming the other for the first shots, the US reimposed the blockade on 14 July. Iran's deputy foreign minister said Washington had destroyed the agreement and that Tehran was no longer bound by it; President Trump said Iran had 'shot first'.

The alternatives are thin. Rail shipments of crude to China have been discussed, but Al Jazeera's analysis found rail impractical for crude at meaningful scale. Oil is the one export that the land routes cannot carry in volume.

Prices and the rial

Inflation is running close to 90 per cent, though the two official measures differ. The Statistical Centre of Iran reported consumer prices 88.6 per cent higher than a year earlier in the month to 21 June; the Central Bank of Iran put the same figure at 83.1 per cent. The gap reflects different baskets and methods, and both are well above the IMF's April forecast of about 69 per cent average inflation for 2026. Food has driven the rise: meat was up about 178 per cent and bread and cereals about 139 per cent. Rural households faced inflation of 108.1 per cent against 85.2 per cent in cities.

The rial moved from about 1.35 million to the dollar at the start of the year to a record of around 1.9 million. The official minimum monthly wage of 166.3 million rials covers about 37 per cent of an estimated basic living basket, according to Euronews. The IMF projected a real contraction of about 6.1 per cent in 2026. Al Jazeera cited estimates that poverty could reach 45 per cent of the population, up from 30 per cent five years ago.

Why has the economy not stopped? The answer offered by economists interviewed by Al Jazeera is diversification and informality: agriculture, manufacturing and services keep running, and cash transfers and subsidies spread the loss across households. One economist, Hadi Kahalzadeh, described the result as keeping 'the system functioning' while dumping the cost 'directly onto households'. The same report cited allegations that more than 20,000 exporters had not repatriated about $107bn in required earnings; these are claims, not audited figures.

The neighbours: food in, not oil out

Trade has shifted to land and the Caspian, but mostly for imports. Pakistan opened six land routes from its ports in late April for goods such as rice and meat. According to Kpler data cited by RFE/RL, around a dozen ships from Russia, Kazakhstan and Turkmenistan carried grain, maize and sunflower oil to Iran's Caspian ports between mid-April and early May. These flows feed the country. They do not earn it hard currency.

Türkiye is the largest land partner to the west, and its trade with Iran was already weakening before the war. Turkish data showed $5.1bn in two-way trade in the first 11 months of 2025, about $2.8bn of Turkish exports and $2.3bn of imports, with natural gas more than 60 per cent of Turkish purchases. In January Turkish exporters reported daily truck traffic at the border down by about 40 per cent, citing Iran's protests and the threat of US tariffs on Iran's trading partners. The Kapıköy–Razi crossing remains open, but RFE/RL found no clear evidence by May that Iran's imports through it had risen.

Central Asia's exposure is small in money but real in logistics. Kazakhstan exported $239.3m to Iran in 2025, about 90 per cent of it farm goods, and imported $191m; together about 0.3 per cent of its trade. In April Deputy Foreign Minister Arman Issetov said many joint projects had been frozen 'due to the country being in a state of war', including a planned terminal at Shahid Rajaee port.

What to watch

The indicator that matters most is whether the blockade holds through the autumn. While it does, Iran's revenue depends on how much stored oil it can move, not on production. The second is the gap between the two inflation measures, which will show whether the central bank is prepared to acknowledge the full price shock. The third is the Turkish and Caspian border data, which will reveal whether overland imports are growing or merely rerouting. The snapback's legal status will matter again only if a settlement opens the question of which sanctions are lifted, and by whom.

Sources

• Al Jazeera — How the US naval blockade has bled Iran of nearly $6bn in oil revenues
• Al Jazeera — How has Iran's economy survived despite US war pressure
• Euronews — Iran's inflation spiral deepens as rial slides and tensions rise
• Al Jazeera — US reimposes blockade on Iranian ports, launches more strikes
• China Daily — Sanctions reimposition 'null and void': Tehran
• RFE/RL — Iran Is Using Alternative Routes To Bypass US Naval Blockade
• Turkish Minute — Turkey-Iran trade slows as exporters warn of Trump tariff risk
• The Times of Central Asia — Kazakhstan Freezes Projects with Iran Amid Military Conflict