War weighs on Iran's economy as US intensifies sanctions

War weighs on Iran's economy as US intensifies sanctions. Reuters Published August 29, 2026 Updated August 29, 2026 06: 56pm.

Key points

• Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani met with Iranian leaders in Tehran on Thursday.
• President Masoud Pezeshkian informed state media that Iranian exports and imports had slumped almost 35pc since of US sanctions and a naval blockade of Iranian ports.
• Iranian Foreign Minister Abbas Araqchi on Friday described the discussions with Al Thani as "creative".
• Only seven commodity vessels transited the strait on Thursday, down from 17 a day earlier and below the 10-day average of 15, preliminary shipping data indicated on Friday.
• US military commanders claim American forces have cleared sea mines from the strait that had been laid months ago by Iran's Islamic Revolutionary Guard Corps.

Iranian leaders are acknowledging the economic toll of war with the US, with the supreme leader urging the administration to address the hardship and the president saying foreign trade has shrunk by a third due to the American sanctions and blockade.

Yet Tehran signalled no retreat on Saturday, vowing to withstand US pressure, pursue diplomacy and maintain what it remarked was control over the Strait of Hormuz, the strategic waterway giving Iran leverage through its ability to disrupt global energy markets.

Authorities stated in an official note on state media that addressing economic pressures caused by sanctions and war was a central focus, including curbing inflation, managing markets, creating jobs, directing investment towards domestic production and gradually reducing dependence on the dollar.

Six months after the US and Israel introduced the war, negotiations are at an impasse and President Donald Trump's administration has stepped up efforts to punish Iran financially with what it has billed as an "economic D-Day". Sanctions compund toll on Iran's economy.

Washington has cautioned countries to cut business ties with Iran or face secondary sanctions, though the Treasury Department ceased short of imposing penalties against major Iranian trade partners such as China and India. It could have repercussions for the US and global economies.

Meanwhile, the Treasury imposed sanctions on Egypt's Banque Misr for doing business with Tehran, proposing a rule that would cut off the bank's branches in the United Arab Emirates from dollar transactions.

Egypt's central bank remarked it and the foreign ministry were in contact with US office-holders concerning the matter, adding the measure was limited to Banque Misr UAEs US dollar transactions with correspondent banks only.

Banque Misr remarked afterwards in an official note it was reviewing the US Treasury notice, adding that its branch in the UAE continued to provide banking services to its customers in line with applicable rules and procedures.

Notably, the US additionally issued sanctions targeting an entity based in Hong Kong and a person linked to Iran's Bank Melli, according to a notice on the Treasury website.

Meanwhile, the sanctions drive compounds the toll of the war on Iran's economy, where annual inflation hit 66 per cent last month.

Supreme Leader Ayatollah Mojtaba Khamenei who has not been seen publicly since initial February 28 attack that assassinated his father and former supreme leader, Ayatollah Ali Khamenei, called on the administration to tackle the economic hardship.

"There is the need to seriously address the chain of economic and livelihood challenges, such as inflation, unemployment, management of prices and the market for goods and services, " according to a written statement attributed to Khamenei.

When Washington permitted Iranian oil sales, but he remarked Iran was able to sell concerning 90 million barrels of oil during the short-lived memorandum of understanding that the US and Iran signed in June. Iran vows to pursue diplomacy and defence.

With the US focused on its economic pressure campaign, others have sought to revive diplomatic efforts to end the war.

Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani met with Iranian leaders in Tehran on Thursday. He remarked he had stressed during the gathering the importance of returning to the pre-war status of open shipping through the Strait of Hormuz.

In Saturday's statement, Iran remarked diplomacy and defence were "two complementary, coordinated and inseparable wings" for protecting the country's national interests, security and territorial integrity. It remarked it would pursue both tracks in a balanced manner.

Qatar, a US ally and Gulf neighbour to Iran, and Pakistan supported broker the Islamabad memorandum of understanding that led to a brief ceasefire before disagreements over the vital strait caused it to unravel. Before the war, the waterway carried 20pc of the world's oil and LNG.

Trump has repeatedly remarked the Strait of Hormuz is open, but the Revolutionary Guards' navy stated in an official note that such claims "are an obvious lie", reiterating that the waterway remained closed to ships without Iranian permission.

Taken together, the developments around war weighs on Iran' s economy as US intensifies sanctions point to a situation that is still moving, and the coming days should bring more clarity.