Oil blockade would strip cash-strapped Iran of significant revenue stream amid economic crisis

By blocking Iranian exports in retaliation for the closure of the Strait of Hormuz, the Trump administration is poised to strip the cash-strapped regime in Tehran of one of its last streams of revenue.  

President Donald Trump ordered the blockade to begin on Monday after negotiations in Pakistan between U.S. and Iranian officials ended in a stalemate. In those negotiations, Iranian officials steadfastly refused to drop their demand for a new role in governing the vital waterway. 

Iran, which has effectively closed the Strait of Hormuz since the beginning of the conflict with the U.S. earlier this year, has exploited its position there to continue its own exports to Asia while those of its neighbors languished – providing the regime with a revenue stream to prop up its war effort. 

Iran's economy in free-fall before military action

The sting of a naval blockade of these oil exports will be even more pronounced given the dire straits of Iran’s pre-war economy. Before the initial U.S. strikes in February, Iran’s economy was suffering from persistently high inflation, the collapse of its currency, and declining agricultural production after years of drought. 

The economic instability fueled the largest round of anti-regime protests in recent Iranian history which brought the Islamic Republic to the brink of political collapse. Only a violent crackdown by loyal security forces ended the wave of demonstrations. The Guardian has reported that the number of demonstrators murdered could exceed 30,000, far surpassing official figures. This is based on the conclusion that “officially registered deaths related to the crackdown likely represent less than 10% of the real number of fatalities."

Iran analysts say that if the U.S. blockade succeeds in preventing Iran’s exports, it would be a disaster for the country’s already struggling economy. 

“[Iran] came into a 40-day war, with an economy that was on its knees,” Mark Dubowitz, CEO of the foreign policy think-tank Foundation for Defense of Democracies, told Just the News. 

“They sustained somewhere in the neighborhood of $150 to $300 billion, according to our estimates, in direct damage as a result of the 40-day war. And now their only lifeline, which is their ability to sell oil to the Chinese, is going to be blockaded. That's going to cost them an additional $435 million a day, with about $13 billion a month, while the President is continuing to squeeze them economically,” Dubowitz said in an interview on the John Solomon Reports podcast.  

“So, this regime is facing economic ruin, and the only choice it has is to stop threatening poor news, stop threatening the global energy markets, and take advantage of President Trump's very generous offer to do a deal. If it refuses all of that, it's facing economic collapse, and that ultimately could lead to regime collapse,” he added. 

Miad Maleki, a former U.S. Treasury Department official in the Office of Foreign Assets Control and an analyst at FDD, laid out the estimates: a U.S. blockade of shipments from Iran’s ports could cost the regime “approximately $276M/day” and also “disrupt $159M/day in imports,” thus costing a combined economic damage of $13 billion per month.

Blockade makes continued resistance economically impossible for Iran

“Iran's alternatives outside the Strait can replace less than 10% of Gulf throughput,” Maleki, now a Senior Fellow at the Foundation for Defense of Democracies, posted to X. “The blockade makes continued resistance economically impossible.”

Iran may have been better poised to absorb the predicted economic damage of an oil blockade, but its enduring financial instability remains, and was likely made worse by the war with the United States. 

Iranian officials, insiders, and business owners told Reuters that the damage from the war has made the economic situation untenable. One official said that the damage to the country’s biggest industrial facilities, which in large part drove Iran’s domestic economy, would take months to repair. American and Israeli strikes reportedly damaged Iran’s steel plants, its petrochemical industry, and production facilities at the country’s South Pars gas field.

The official predicted that Iran would “face a disaster" if U.S. sanctions remained. 

Even before the war disrupted Iran’s industrial production and military factories, Iran’s economy was in dire straits. Shortly before the New Year, protesters gathered in Iran’s capital of Tehran, their demonstrations sparked by increasingly difficult economic conditions. After the New Year, the protests spread across the country and took on a decisively anti-regime character. The protests emerged after persistent inflation in the Iranian economy grew worse throughout 2025. 

Iran’s economy has been plagued by persistent inflation in recent years that rapidly accelerated in 2025. In January 2025, inflation stood at 31.8% but jumped to 48.6% by October that same year. The currency, the rial, crashed in December, angering the Iranians, like the small shopkeepers who sparked the demonstrations in Tehran. 

In addition, a years-long drought has impacted Iran’s agricultural yields, causing food prices to rise. This also forced the country to import food from abroad to meet demand at the same time that Iran's currency was losing its value in international trade.

Prior to the war, the government of late Iranian President Ebrahim Raisi–who died in a helicopter crash in 2024–took on new government debt from domestic banks to cover budget shortfalls. This forced the regime’s central bank to print new banknotes, fueling the inflation crisis and masking Tehran’s difficulty in supporting its own government. 

Since the war began in February, Iran has sought to weaponize its commanding position over the Strait of Hormuz to disrupt global oil markets to inflict maximum pain on the United States and its allies, in the hopes of outlasting the coalition arrayed against it. 

It was one of the main points of contention leading into the weekend negotiations between U.S. and Iranian officials in Pakistan, and Iran steadfastly refused to back off its demand to retain control over the waterway after the war’s end through a toll system. Iran’s intransigence prompted Vice President JD Vance to announce that the regime was unwilling to engage on any of the U.S.’s red lines, which included Iran’s denuclearization and freedom of navigation in the strait. 

It also prompted Trump to announce that the U.S. Navy would implement an oil blockade of Iran, vowing to intercept any vessel departing from the country carrying oil across the globe. 

“Iran will not be allowed to profit off this Illegal Act of EXTORTION,” President Trump posted to Truth Social, announcing the planned blockade. He warned that the U.S. was “LOCKED AND LOADED,” and prepared to begin striking Iran again if they did not comply.