Iran’s worsening economic crisis raises questions over Tehran’s willingness to compromise

Iran is experiencing one of its most severe economic crises in decades, marked by a collapsing rial, soaring inflation, and a dramatic decline in oil exports. The rial recently fell below 2 million to the US dollar, and inflation is officially over 80%, with food prices increasing by 120-180%. Iranian President Masoud Pezeshkian stated that foreign trade has contracted by about 35% due to US sanctions and maritime disruptions. The World Bank estimates Iran's economy contracted by 2.7% in the last fiscal year.

“The main problem is inflation,” Dr. Raz Zimmt, director of the Iran and Shi'ite Axis Program at the Institute for National Security Studies (INSS), told The Jerusalem Post. “The official inflation rate is more than 80%. But what is even more interesting is the price of basic goods, particularly food, which has increased by between 120% and 180%.”

US sanctions, particularly the blockade disrupting oil exports, are intensifying the pressure, with crude oil exports reportedly plunging from 2 million barrels per day in March to 220,000-255,000 in August. Despite the economic hardship, Dr. Zimmt believes there are no clear signs that the crisis will lead to protests threatening the regime's stability, noting, “There is a difficult economic situation, there is inflation, but it is not unbearable at this point.” He cautions against assuming economic pressure alone will force Iran into a compromise, suggesting Tehran needs an offer that allows it to "save face."