The regime is escalating around the Strait of Hormuz, but the Trump administration's economic campaign is steadily depriving Tehran of money, options and time.
Iran is entering what may be the most dangerous stage of its confrontation with the United States. Its government is weaker, its oil income is collapsing and its population is enduring extraordinary economic hardship. Yet rather than concede, Tehran is escalating around the Strait of Hormuz in a desperate attempt to recover its diminishing leverage.
The latest confrontation began when Iran launched additional missiles at an American warship. The United States responded Tuesday by striking several Iranian oil tankers near Jask and Kharg Island. Iran has threatened tankers operating near Kuwait and Bahrain and says it will establish a new “exclusion zone” near the strait.
Iran’s Houthi allies have also widened the conflict, launching missiles and drones against Saudi energy facilities and other economic targets. Dozens of people were injured. These attacks suggest Tehran is trying to make neighboring countries — and ultimately American consumers — pay for Washington’s economic campaign.
The regime’s strategy is not difficult to understand. If Iran cannot export its own oil, it will threaten everyone else’s ability to export oil. If it cannot defeat the United States militarily, it will try to raise gasoline prices, frighten shipping companies and create political pressure on President Donald Trump before the midterm elections.
The danger is real.
Brent crude approached $100 per barrel Tuesday as shipping traffic through Hormuz slowed. A sustained disruption would increase transportation costs and complicate the administration’s campaign to reduce inflation.
But Iran’s ability to manipulate the oil market is no longer unlimited. Gulf producers are using alternative export routes. Production outside the Middle East is increasing, while lower Chinese demand has prevented the explosive price increase Tehran hoped to produce. Ships are still moving through Hormuz, although at reduced levels and considerable risk.
At the same time, Treasury Secretary Scott Bessent’s economic-pressure campaign is beginning to bite with remarkable force.
Iranian oil exports reportedly have fallen by approximately 85 percent under the renewed American blockade. Its stored offshore crude has declined from roughly 90 million barrels to about 29 million. If the blockade holds, much of that remaining supply could be exhausted by the middle of October.
That matters because oil revenue funds about one-third of the Iranian government’s budget. It also finances the Revolutionary Guard, missile programs and the network of foreign militias Tehran uses to project power without accepting direct responsibility.
Previous sanctions regimes contained too many openings. Iran moved oil aboard shadow-fleet tankers, routed payments through foreign exchange houses and relied on commercial networks in neighboring countries. China’s small independent refineries were often willing to purchase heavily discounted Iranian crude.
The Trump administration is now attacking those escape routes simultaneously.
The Navy is restricting physical exports, while the Treasury Department targets shipping companies, banks, currency exchanges and procurement networks. Secondary sanctions are forcing foreign businesses to decide whether trading with Iran is worth losing access to the American financial system.
The United Arab Emirates, historically one of Iran’s most important commercial gateways, has curtailed financial and trading activity with the country. Bandar Abbas, once a bustling center of Iranian commerce, has been badly damaged. Customs activity has reportedly fallen by as much as 90 percent. Dockworkers, merchants and taxi drivers are losing their livelihoods while the cost of imported food rises.
Average monthly pay in Iran reportedly covers less than one-third of a household’s basic expenses. Inflation exceeds 80 percent, and the rial continues to lose value. This is no longer ordinary economic stagnation. It is a national emergency.
None of this guarantees the regime’s surrender. Authoritarian governments can survive tremendous suffering because their leaders do not personally bear most of it. The security services remain capable of arresting demonstrators and suppressing organized opposition. Neither economic misery nor public anger automatically produces revolution.
Nevertheless, the Iranian government is in an increasingly unenviable position. Its supreme leader is dead. Its military infrastructure has suffered enormous damage. Its oil income is disappearing, while Russia and China have offered rhetoric but little evidence that they are willing to challenge the American blockade directly.
Trump’s policy is therefore working, although it has not yet produced a diplomatic breakthrough. The administration has reduced Iran’s military and financial freedom while leaving Tehran a possible exit through negotiations. Oman continues trying to mediate an agreement that could reopen Hormuz, but Washington reasonably wants more than another temporary pause. Any durable settlement must protect freedom of navigation and address Iran’s nuclear program.
The coming weeks may determine whether Tehran accepts such an arrangement. As its stored oil dwindles, the regime will find it harder to pay government workers, finance the Revolutionary Guard and sustain its proxies.
Iran may launch more attacks before it changes course. That is the peril of squeezing a government that still possesses missiles and mines. But escalation should not be confused with strength. Iran is lashing out because its traditional sources of power are disappearing.
The Trump administration’s challenge is to remain firm without allowing Tehran to widen the war indefinitely. If Washington can protect shipping, enforce the economic blockade and keep a credible diplomatic door open, time will increasingly favor the United States.
Iran’s leaders are trying to prove that they can outlast Trump. Their rapidly emptying oil tanks suggest otherwise.
(Contributing writer, Brooke Bell)