- 01
- Sep.
- 2025
Three months after the “twelve-day war” with Israel, Iran is struggling to keep its economy afloat under severe US sanctions. With mounting military pressure, the return of European sanctions and the continuing collapse of its currency, the Islamic Republic has never been more vulnerable.
Fragile Growth
Despite decades of international restrictions, Iran’s economy showed some resilience in 2024. The World Bank reported a GDP of $436.9 billion, largely fueled by oil exports. Yet, behind this figure lies a starkly contrasting reality: a dual market where the official rial rate masks the currency’s collapse on the black market.
Iran remains heavily reliant on crude oil, exporting between 1.2 and 1.5 million barrels per day, primarily to China. These revenues allowed Tehran to cover daily expenses and partially contain inflation, which was already approaching 40%, according to the International Monetary Fund (IMF).
The Shock of Europe’s Snapback
August 28, 2025, marked a turning point. France, the United Kingdom and Germany reactivated the “snapback” mechanism, reinstating trade and financial sanctions in response to Tehran’s nuclear shortcomings.
Though not a UN embargo, the measures pose a direct threat to banks, insurers and shippers involved in Iranian trade. Crude shipments still find buyers, but at heavily discounted prices, with China effectively becoming the sole purchaser.
Maritime routes have become more complicated as well. Iranian tankers now take tortuous paths through Malaysia, Singapore or Vietnam to conceal the origin of their crude.
A Currency in Free Fall
Following the reinstatement of sanctions, Iran’s domestic economy is under severe strain. In the spring, the rial crossed a symbolic threshold, surpassing one million per dollar on the black market. Today, it trades between 1.05 and 1.08 million, further entrenching the dollarization of the economy.
For households, daily life has grown increasingly precarious. The minimum wage, set in March at 104 million rials (roughly $100-110 at the parallel rate), barely covers basic needs. The erosion of purchasing power has deepened public distrust in the national currency, prompting Iranians to hoard foreign currency or gold.
Toward a Survival Economy
The June conflict highlighted the fragility of Iran’s economic system. Israeli strikes on oil infrastructure briefly halted exports, underscoring the strategic vulnerability generated by heavy reliance on crude oil.
Today, Iran continues to finance its budget through exports to China, but at discounted prices and amid growing financial isolation. The IMF projects that GDP, already in decline, will drop to $341 billion in 2025, a stark sign of gradual economic strangulation.
While the economy has not collapsed, it survives through constant improvisation. The result is a drained currency, slashed purchasing power and near-total dependence on China. More than ever, Iran is caught between sanctions and regional tensions, forced to sell its oil at sacrificed prices just to keep the state afloat.
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