President Donald Trump said the US is "low-keying" its confrontation with Iran, keeping economic and military pressure on while holding off on another major attack.
The shift comes as a US naval blockade has halted crude exports from Iran's main oil terminal and American forces have redirected 55 commercial vessels.
“We are just watching Iran with its huge inflation and the fact they have no money,” Mr Trump told Axios, saying Tehran was “in very bad shape” economically and unable to pay its troops.
His comments came little more than a week after he threatened Iran with what he called “the biggest attack since World War II”.
It remains to be seen whether economic pressure can force Iran to compromise after months of military action have failed to achieve Washington's central political objective.
Iran analyst Vali Nasr said Mr Trump was preparing for an exit from the conflict. “In effect he is getting the ground ready to abandon the war,” Mr Nasr wrote on X.
Aaron David Miller, a former US Middle East negotiator, said the approach was probably the least damaging of Mr Trump’s available options. “Probably won't work,” Mr Miller wrote. “But it makes virtue out of a necessity.”
When the US and Israel launched the war against Iran on February 28, Mr Trump said it was to eliminate "imminent threats from the Iranian regime", and called on Iranians to dislodge their rulers. The regime survived, however, and Tehran has since hardened its position in negotiations over a durable peace.
An initial ceasefire took effect on April 8. Since then, Mr Trump has repeatedly shifted between threats of renewed military action and attempts to negotiate.
Now Washington is maintaining the pressure without immediately widening the war.
Economic squeeze biting
There are already signs the economic squeeze is biting.
Maritime intelligence company Windward said Iran’s crude export pipeline remained completely halted at Kharg island, the country’s main oil export hub.
“All three Kharg terminals are empty,” Windward said. The western terminal had been inactive for 22 consecutive days, while the LPG and eastern terminals were also idle.
Windward recorded zero departures from Kharg between July 31 and Sunday. Seventeen tankers remained stationary in the waiting area, which it described as a “dark queue that isn’t moving”.
The US military said it had redirected 55 commercial vessels. Two were disabled and two others were boarded, Central Command said. The blockade is hitting an economy already weakened by years of sanctions.
Masoud Nili, one of Iran’s prominent economists, has described the country as being at a historic crossroads. Since 2018, the exchange rate has increased nearly 50-fold and food prices have risen more than 34-fold, according to figures he cited in a report published in Iran's Donya-ye Eqtesad newspaper.
About 16 million people have fallen below the poverty line. The employment figures are equally grim. The jobless rate is about 9.4 per cent, but six in 10 people are not participating in the labour market — they include full-time students, homemakers, retirees and others not looking for work.
Young and jobless
Since 2019, Iran’s working-age population has increased by about five million, while net employment has risen by only 400,000.
People in their 20s account for the largest share of both the inactive and unemployed populations. The deterioration is particularly striking among women. The working-age female population has increased by 2.6 million, yet female employment has actually fallen, with around 700,000 jobs disappearing.
Iran also lost about 630,000 industrial jobs between spring 2025 and spring 2026, wiping out employment gains accumulated over the previous eight years.
But whether economic pain produces political change is far less certain. Omid Memarian, a senior Iran analyst at the democracy and human rights organisation DAWN, said the timing could prove decisive.
“Iran has been isolated economically for a long time,” he told The National. “But will it collapse in six months or a year? I don’t think it has six months or a year to wait.”
Mr Memarian said the war had temporarily helped the regime withstand economic pressure by generating nationalism and allowing Tehran to keep its “repression machinery activated at the highest level possible”.
'Ocean of expectations'
The bigger test could come after the fighting ends. “Once the war is settled, they will face an ocean of expectations, while they have no resources to accommodate the demands,” Mr Memarian said.
That could bring people back onto the streets while exposing divisions within Iran’s leadership that the war has temporarily concealed. “There is a huge rift at the top of leadership right now,” he said. “The war allows them to hide it.”
Iran’s hardliners appear to believe Mr Trump cannot sustain the confrontation beyond the next few months and are hoping he eventually releases Iranian assets, removes sanctions and offers security guarantees.
For Mr Trump, the gamble is that Iran’s economic crisis will eventually accomplish what military threats have not.
If inflation, unemployment and lost oil revenue force Tehran towards a deal, he can claim pressure worked without launching another devastating attack.
But economic pressure can also strengthen hardliners, particularly if Iran believes Washington is constrained by military stockpile pressures, the approaching US elections and the economic risks of prolonged disruption in the Strait of Hormuz.
The longer the blockade lasts, the greater those risks become.
