August24, 2026
Mahyar Ramezankhani
The Strait of Hormuz has been
effectively closed for most of the past six months. Brent crude is trading just
below $90 a barrel, and rose about five percent in a single session earlier
this month.
Yet when the International Monetary Fund (IMF) revised its global forecast on 8 July, it trimmed 2026 growth from 3.1 to 3.0 percent - one-tenth of a percentage point for the closure of the world’s most important oil chokepoint and five months of war. The oil market has repriced; the world economy has barely moved.
The more instructive anomaly is inside Iran. By any conventional reading, the Iranian economy should be in freefall.
In April, the IMF cut its 2026 forecast for Iran by 7.2 percentage points, from growth of 1.1 percent to a contraction of 6.1; its July update revises that slightly, putting the contraction at 5.4 percent.
Consumer prices in June were 88.6 percent higher than a year earlier; food, beverages and tobacco were up 134.6 percent, with red meat and poultry rising by 178 percent.
On Monday, the rial touched 2m to the dollar following news that Washington was preparing to announce new sanctions.
Gas output has fallen by roughly 230m cubic metres a day against a prewar 650m; petrol was already running some 20m litres a day short before the fighting began, and cities are rationing electricity.
And yet official unemployment is just 7.5 percent. Salaries and pensions are being paid. Shops are stocked. There has been no banking crisis, no sovereign default, no disorderly failure of a major firm.
Whatever this is, it is not the collapse that more than five months of bombardment and naval blockade would produce almost anywhere else.
Nothing to withdraw
The explanation is an interesting one, because it inverts what economists normally tell governments. Nearly every feature that makes Iran a poor place to deploy capital in peacetime - concentrated ownership, rationed foreign exchange, near-total detachment from global finance, a handful of quasi-state actors sitting astride the export economy - is precisely what is absorbing the war.
Start with the simplest mechanism: there is nothing to withdraw. Iran carries negligible external debt and almost no foreign portfolio investment. You cannot have capital flight without foreign capital.
The Tehran Stock Exchange shut on 28 February as the US-Israeli strikes on Tehran began, and stayed closed for about 80 days. A market no foreigner owns can simply be switched off.
What happened when it reopened in May is stranger. The Tedpix index had slipped to around 3.7m points before the closure, well below the 4.5m it reached at the start of the year. It passed 5.9m in early July - an all-time high, set in the fifth month of a war - before falling back below 5m within a week.
Read the rally as confidence, and you misread it. With deposit rates deeply negative in real terms and hard currency rationed, Iranian savers have nowhere else to put money. Adjusted for the rial, the gain is not really a gain: the index rose because the exits are shut, and it fell again the moment the ceasefire framework that had briefly lifted the currency came apart.
Then there is concentration, which in wartime works as an allocation system. When feedstock supplies to the petrochemical complexes at Asaluyeh and Mahshahr were disrupted, the government halted petrochemical exports outright to keep domestic plants running.
An open market would have needed price signals, renegotiated contracts and several months. Iran needed an instruction to perhaps a dozen entities. The deadweight loss of monopoly in peacetime is command capacity in war, and Iran has been accumulating it for 15 years.
Thirdly, the workarounds were not improvised under fire. Before the war, Iran was moving between 1.4m and 1.8m barrels a day through a fleet of several hundred elderly tankers, with the bulk going to independent refiners in Shandong, China, at discounts of around $10 to $15 against Brent.
The overland routes into Iraq, Turkey and Pakistan, and the rail links towards Russia and China, were built when shipping was merely sanctioned rather than blockaded. The oil ministry says it sold $11.5bn of crude during the fighting itself, and another $6.5bn during the ceasefire period, generating more than 60 percent of the revenue budgeted for the year.
Sanctions did not weaken this infrastructure. They commissioned it.
Households pay the price
Here, the argument has to concede something. What is happening is not shock absorption. It is shock transfer.
In an integrated economy, a war surfaces on balance sheets: defaults, bankruptcies, equity wipeouts, a bond market that forces the government’s hand within weeks. In a closed economy with a rationed multiple exchange rate, it surfaces in prices instead.
Economist Hadi Kahalzadeh, of the Quincy Institute, told Al Jazeera that shocks absorbed through inflation and currency depreciation keep goods on the shelves but make them increasingly unaffordable. The system keeps functioning, as the costs land directly on households.
The monthly minimum wage is now worth about $87 at the open-market rate. A study by a think-tank affiliated with Iran’s state pension fund projected poverty rising from around 30 percent five years ago to 45 percent this year. Nothing broke; households paid.
The loyalty the system depends on is conditional, too. The same concentration that lets the state direct resources hands a small number of exporters the largest arbitrage opportunity in the country.
Iran’s General Inspection Organization reported last month that more than 20,000 exporters had failed to repatriate €94bn ($107bn) of earnings, and that trustees appointed to bring back sanctioned oil proceeds were holding at least $11bn of it. A system that can be commanded can also be farmed, and it is being farmed by the actors who make the commanding possible.
The deeper cost is what is not being spent. Gross fixed capital formation was contracting before the first bomb fell. An economy that stays upright by depreciating its currency, rationing its dollars and deferring maintenance on its refineries and its grid is consuming its own capital stock. That is a strategy with a term structure, and the term is probably short.
None of this is an argument for isolation. It is an argument for separating two things the post-1990 consensus fused together: integration and safety are not the same property. Iran has built an economy that is unusually hard to break and, for exactly the same reasons, unusually hard to grow. The IMF pencils in 3.2 percent for 2027, which is a bounce off a floor rather than a repair.
You could put it more bluntly. Sanctions arrested Iran’s development and hardened it at the same time. The country was denied a decade of growth, and given in exchange a tolerance for punishment that few open economies possess.
For anyone treating economic pressure as a lever, that is the finding worth sitting with. The absence of collapse is not evidence that the pressure is about to work. It is evidence that 15 years of pressure already built the thing now doing the absorbing.
Mahyar Ramezankhani
Tehran was denied a decade of
growth, and given in exchange a tolerance for punishment that few open
economies possess
Yet when the International Monetary Fund (IMF) revised its global forecast on 8 July, it trimmed 2026 growth from 3.1 to 3.0 percent - one-tenth of a percentage point for the closure of the world’s most important oil chokepoint and five months of war. The oil market has repriced; the world economy has barely moved.
The more instructive anomaly is inside Iran. By any conventional reading, the Iranian economy should be in freefall.
In April, the IMF cut its 2026 forecast for Iran by 7.2 percentage points, from growth of 1.1 percent to a contraction of 6.1; its July update revises that slightly, putting the contraction at 5.4 percent.
Consumer prices in June were 88.6 percent higher than a year earlier; food, beverages and tobacco were up 134.6 percent, with red meat and poultry rising by 178 percent.
On Monday, the rial touched 2m to the dollar following news that Washington was preparing to announce new sanctions.
Gas output has fallen by roughly 230m cubic metres a day against a prewar 650m; petrol was already running some 20m litres a day short before the fighting began, and cities are rationing electricity.
And yet official unemployment is just 7.5 percent. Salaries and pensions are being paid. Shops are stocked. There has been no banking crisis, no sovereign default, no disorderly failure of a major firm.
Whatever this is, it is not the collapse that more than five months of bombardment and naval blockade would produce almost anywhere else.
Nothing to withdraw
The explanation is an interesting one, because it inverts what economists normally tell governments. Nearly every feature that makes Iran a poor place to deploy capital in peacetime - concentrated ownership, rationed foreign exchange, near-total detachment from global finance, a handful of quasi-state actors sitting astride the export economy - is precisely what is absorbing the war.
Start with the simplest mechanism: there is nothing to withdraw. Iran carries negligible external debt and almost no foreign portfolio investment. You cannot have capital flight without foreign capital.
The Tehran Stock Exchange shut on 28 February as the US-Israeli strikes on Tehran began, and stayed closed for about 80 days. A market no foreigner owns can simply be switched off.
What happened when it reopened in May is stranger. The Tedpix index had slipped to around 3.7m points before the closure, well below the 4.5m it reached at the start of the year. It passed 5.9m in early July - an all-time high, set in the fifth month of a war - before falling back below 5m within a week.
Read the rally as confidence, and you misread it. With deposit rates deeply negative in real terms and hard currency rationed, Iranian savers have nowhere else to put money. Adjusted for the rial, the gain is not really a gain: the index rose because the exits are shut, and it fell again the moment the ceasefire framework that had briefly lifted the currency came apart.
Then there is concentration, which in wartime works as an allocation system. When feedstock supplies to the petrochemical complexes at Asaluyeh and Mahshahr were disrupted, the government halted petrochemical exports outright to keep domestic plants running.
An open market would have needed price signals, renegotiated contracts and several months. Iran needed an instruction to perhaps a dozen entities. The deadweight loss of monopoly in peacetime is command capacity in war, and Iran has been accumulating it for 15 years.
Thirdly, the workarounds were not improvised under fire. Before the war, Iran was moving between 1.4m and 1.8m barrels a day through a fleet of several hundred elderly tankers, with the bulk going to independent refiners in Shandong, China, at discounts of around $10 to $15 against Brent.
The overland routes into Iraq, Turkey and Pakistan, and the rail links towards Russia and China, were built when shipping was merely sanctioned rather than blockaded. The oil ministry says it sold $11.5bn of crude during the fighting itself, and another $6.5bn during the ceasefire period, generating more than 60 percent of the revenue budgeted for the year.
Sanctions did not weaken this infrastructure. They commissioned it.
Households pay the price
Here, the argument has to concede something. What is happening is not shock absorption. It is shock transfer.
In an integrated economy, a war surfaces on balance sheets: defaults, bankruptcies, equity wipeouts, a bond market that forces the government’s hand within weeks. In a closed economy with a rationed multiple exchange rate, it surfaces in prices instead.
Economist Hadi Kahalzadeh, of the Quincy Institute, told Al Jazeera that shocks absorbed through inflation and currency depreciation keep goods on the shelves but make them increasingly unaffordable. The system keeps functioning, as the costs land directly on households.
The monthly minimum wage is now worth about $87 at the open-market rate. A study by a think-tank affiliated with Iran’s state pension fund projected poverty rising from around 30 percent five years ago to 45 percent this year. Nothing broke; households paid.
The loyalty the system depends on is conditional, too. The same concentration that lets the state direct resources hands a small number of exporters the largest arbitrage opportunity in the country.
Iran’s General Inspection Organization reported last month that more than 20,000 exporters had failed to repatriate €94bn ($107bn) of earnings, and that trustees appointed to bring back sanctioned oil proceeds were holding at least $11bn of it. A system that can be commanded can also be farmed, and it is being farmed by the actors who make the commanding possible.
The deeper cost is what is not being spent. Gross fixed capital formation was contracting before the first bomb fell. An economy that stays upright by depreciating its currency, rationing its dollars and deferring maintenance on its refineries and its grid is consuming its own capital stock. That is a strategy with a term structure, and the term is probably short.
None of this is an argument for isolation. It is an argument for separating two things the post-1990 consensus fused together: integration and safety are not the same property. Iran has built an economy that is unusually hard to break and, for exactly the same reasons, unusually hard to grow. The IMF pencils in 3.2 percent for 2027, which is a bounce off a floor rather than a repair.
You could put it more bluntly. Sanctions arrested Iran’s development and hardened it at the same time. The country was denied a decade of growth, and given in exchange a tolerance for punishment that few open economies possess.
For anyone treating economic pressure as a lever, that is the finding worth sitting with. The absence of collapse is not evidence that the pressure is about to work. It is evidence that 15 years of pressure already built the thing now doing the absorbing.
US rolls out sanctions it warns
could 'collapse' global economy
Meanwhile, death
toll from Israeli attacks on Gaza rises to 8, including two children
Key Points
Iran Parliament Speaker says US
not in an economic position to impose more restrictions on other countries
Israel says it will treat paper
kites from Gaza as 'act of war'
Houthis say they attacked vessel
off Saudi Arabia
US public approval of Iran war
falls to lowest level since early days of conflict
US public approval for the Iran
war has fallen to 31 percent, its lowest level since the early days of the
conflict, according to a Reuters/Ipsos poll.
Trump's approval rating has held
at 33 percent, remaining at the lowest level of his presidency, the poll found.
Hegseth says US not ruling out
military force against Iran
US Defense Secretary Pete Hegseth
said on Monday that President Donald Trump's administration was not ruling out
using further military force against Iran, even as Washington unveiled an
"economic D-Day" of new sanctions against Tehran.
"By no means are we
foreclosing using kinetic strikes anywhere in the Strait of Hormuz or around
Iran," Hegseth told reporters, adding that Iran could not handle the
economic pressure it was under.
Meanwhile, Iran's economy
minister has claimed that the country has a "two-year plan" to deal
with the sanctions and that the US will suffer "another defeat" as a
result.
EU says E1 settlement plan
fundamentally harms prospects for two-state solution
The European Union said that the
Israeli government’s publication of a tender for the construction of more than
1,200 housing units under the E1 settlement project fundamentally undermines
the prospects for a two-state solution.
In a statement by the High
Representative on Israel’s E1 settlement plan in the West Bank, the EU said
that implementing the plan would divide the West Bank in two and isolate East
Jerusalem, further undermining the viability of a Palestinian state.
It noted that these developments
come amid increasing instability in the West Bank and record levels of
colonists’ violence.
“The EU position is clear:
Israel’s settlements in the West Bank, including in the E1 area, are illegal
under international law,” said the statement.
Bessent admits sanctions may blow
up global economy in apparent slip
US Treasury Secretary says that
American sanctions on Iran could collapse the global economy, in an apparent
slip while answering a question from a reporter at a press conference in
Washington, DC to announce the santions.
When asked by a reporter why the
Treasury doesn't impose the sanctions today, Bessent replied "why would I
want to blow up the global financial system?"
He went on to elaborate that the
US wants to give countries the "opportunity" to abide by their
sanctions as a "warning shot" which, if ignored, will result in such
nations being removed from the US dollar system.
After he delivered the remarks,
Bessent left the press conference, not taking any further questions.
Iran has a 'two year plan' to
counter sanctions, economic minister says
Iranian Economy Minister Ali
Madanizadeh said that the country has a "two-year plan" to counter
new US sanctions announced on Monday, predicting the US will suffer
"another defeat" as a result.
"They have done everything
they could to test the determination of the Iranian people and the country's
officials, but they have failed every time. It seems they wished to suffer yet
another defeat," Madanizadeh told state television.
"We've been waiting for
these plans for a long time, and the government is and was ready and has a
two-year plan to manage these events," he added.
Iran Parliament Speaker: US not
in an economic position to impose more restrictions on other countries
Iranian Parliament Speaker
Mohammad Bagher Ghalibaf said on Monday that the US is not in an economic
position to continue restricting its relations with other countries as the US
Treasury announced "unprecedented" sanctions on Iran.
In a post on X, Ghalibaf said
Iran’s trading partners "have made it clear that they don't take these
statements into account anywhere".
This comes as US Treasury
Secretary Scott Bessent threatened countries allowing Iranian money laundering
to be removed from the US dollar, claiming that any economic engagement with
Iran "will expose those responsible to the full reach of American power".
US announces 'unprecedented'
sanctions against Iran
US Treasury Secretary Scott
Bessent laid out what he described as an "unprecedented" US sanctions
campaign against Iran on Monday, warning that every country has a "finite
timeline" to shut down activities identified by Washington or face action
from the Treasury.
The new Iran sanctions will
include those on tech, gold, aviation, shipping and covers nearly 60 entities,
individuals and vessels.
Bessent said President Donald
Trump was making phone calls to world leaders with specific requests to cease
their interactions with Iran.
"Any entity that facilitates
money laundering on behalf of Iran will be removed from the US dollar system.
The clock just started ticking," Bessent told reporters at a press
conference.
"Around the globe, our
objective is to sever every economic lifeline that sustains this tyrannical
regime until Tehran stands alone," Bessent said, claiming that economic
engagement of any kind with Iran "will expose those responsible to the
full reach of American power".
Besset also hinted that "you
will see a major financial institution being sanctioned by the end of this week
over Iran", without elaborating.
Iranian and Pakistani top
officials meet in Tehran
Pakistan’s military chief Asim
Munir met with Iran’s chief negotiator and parliament speaker Mohammad Bagher
Ghalibaf in Tehran on Monday, according to Iran’s Mehr News Agency.
The two discussed US violations
of its commitments to implement the Pakistani-mediated Memorandum of
Understanding (MoU) signed with Iran in June.
According to Mehr, Ghalibaf told
Munir that “the US, by breaching its commitments, prevented the establishment
of stability in the region and created another reason for distrust”.
Munir said he will continue his
efforts to restore stability in the region.
IRGC says Iran will target ‘US
energy chokepoints’ if attacked
Hossein Mohebbi, spokesman of
Iran’s Islamic Revolutionary Guard Corps (IRGC), warned on Monday of “heavy
attacks on US energy chokepoints and vital interests” if Iran’s infrastructure
is attacked.
“Any attack on Iran’s
infrastructure will bring heavy strikes on US energy chokepoints and vital
interests,” Mohebbi was quoted as saying by Iran’s IRIB state broadcaster,
adding that, “contrary to the enemy’s perception that Iran’s military had
limited reserves, the production of our smart and guided missiles continues”.
Israeli spy Jonathan Pollard
wants Iran ‘off the map’, says wars on Turkey and Egypt are next
Jonathan Pollard, the Israeli spy
who betrayed the United States, has called on Israel to prepare for war against
Egypt and Turkey as he launches his campaign for a Knesset seat in October’s
election.
The American-born former US Navy
intelligence analyst spent 30 years in prison after passing a vast collection
of classified documents to Israel.
In an interview with Israeli news
channel ILTV on Sunday, Pollard called on Israel to wipe Iran “off the map” and
identified Egypt and Turkey as its next major enemies.
“I hate to put it that way, but
Turkey and Egypt are coming up next as our major strategic threat,” said
Pollard.
“And unless we have all these
other fronts eliminated by that time, we're going to be in a terrible
situation,” he added.
Egypt and Turkey both maintain
diplomatic relations with Israel, while Egypt signed a peace treaty with it in
1979.
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