War weighs on Iran's economy as US intensifies sanctions

Iran's leaders are admitting the economic strain caused by the conflict with the United States, with the supreme leader urging officials to tackle the hardship and the president stating that foreign trade has fallen by a third due to US sanctions. Despite this, Iran remains defiant, vowing to withstand American pressure, continue negotiations, and maintain control over the strategic Strait of Hormuz.

The government has made addressing economic pressures caused by sanctions and war a top priority, including reducing inflation, managing markets, creating jobs, and decreasing dependence on the dollar. However, six months into the war, negotiations have stalled, and the US administration has intensified its economic sanctions against Iran.

Washington has warned countries to sever ties with Iran or face secondary sanctions, though it has refrained from targeting major trade partners like China and India. The Treasury Department has also imposed sanctions on Egypt's Banque Misr for dealing with Tehran, and on a Hong Kong entity and an individual linked to Iran's Bank Melli.

These sanctions exacerbate the economic toll of the war in Iran, where annual inflation reached 66% last month. Supreme Leader Ayatollah Khamenei called for the government to address the economic challenges, while President Pezeshkian urged for the revival of the interim deal signed in June, which offered Iran relief from US sanctions and the release of frozen assets.

Iran has vowed to pursue diplomacy and defense as complementary strategies to protect its national interests, security, and territorial integrity.