The war’s severe damage to Iran’s economy comes into view

Virtually all of Iran’s oil exports, along with about 70 percent of its non-oil trade, move through southern waters now disrupted.

By Dalga Khatinoglu, Middle East Forum

The economic toll of more than two months of war is visible in Iran, as a U.S. naval blockade and the effective halt of the Islamic Republic’s maritime trade trigger mounting pressure across the economy.

The sharp depreciation of the Iranian rial is the clearest sign so far of a broader economic breakdown now unfolding.

On April 29, 2026, the U.S. dollar surged 12 percent against Iran’s national money in a single day to nearly 1.8 million rials, marking one of the steepest daily declines in the currency’s history.

The rial had already lost 4 percent of its value between April 20—one week after the U.S. blockade began—and April 28, but the subsequent collapse suggests the currency crisis may be entering a more accelerated phase.

Trade and energy data point to equally severe disruptions. Iranian customs figures show the country recorded only $6.4 billion in non-oil exports in March 2026, nearly half the level of March 2025.

At the same time, daily Iranian crude unloading at Chinese ports fell 15 percent last month to 1.54 million barrels per day.

Even more striking, Chinese customs data indicate that non-oil trade between Iran and China—Tehran’s largest trading partner—plunged to just $184 million in March 2026, roughly one-fifth of its level a year earlier.

Regional isolation compounds the blow. The United Arab Emirates, Iran’s second-largest trading partner, reportedly has halted trade with Iran following Iranian attacks against the country.

The Emirates has reportedly expelled hundreds of Iranian business operators while tightening restrictions on financial networks and exchange houses linked to Tehran, disrupting channels long used for sanctions evasion and external financing.

Shipping data underscore the scale of pressure. According to Homayoun Falakshahi, the senior expert at Kpler, while Iranian vessels continue moving through the Strait of Hormuz, the United States has imposed a far tighter blockade at Iran’s maritime access points to the Indian Ocean, where no Iranian tanker has broken through in the past two weeks.

That carries enormous implications. Virtually all of Iran’s oil exports, along with about 70 percent of its non-oil trade, move through southern waters now disrupted.

Domestic industrial shocks add to the strain. Following recent strikes on steel and petrochemical facilities, Iranian authorities suspended exports from both sectors, which together account for roughly 30 percent of non-oil exports.

Domestic markets also have been hit hard. The Iranian Labor News Agency reported sharp supply disruptions, and construction material prices have surged 60 percent over the past month alone.

The labor market is deteriorating rapidly as well. Iranian officials say 2 million jobs have been lost in the past two months.

Even before the war, Iran faced chronic employment weakness: Out of 66 million people of working age, official figures suggested only 24 million were employed last winter. That number reportedly has fallen to 22 million.

Meanwhile, even official central bank data show food prices have doubled, intensifying pressure on households already struggling with years of inflation. President Donald Trump says Iran’s economy is “collapsing.”

Although Iranian authorities continue to project defiance despite mounting evidence of distress, the economy appears to have limited remaining resilience under current conditions.

Years of systemic corruption, economic mismanagement, sanctions, and regional adventurism had already pushed Iran’s economy close to the edge.

The war may prove to be not merely another shock, but potentially the final blow to the Islamic Republic’s revenue model.