Shortly after he ordered a naval blockade in mid-April, US President Donald Trump said Iran’s pipelines would “explode” in a few days due to an inability to export crude oil.
Although Trump’s extreme predictions have not come true, there is evidence that the embargo is starting to hurt Iran’s economy.
With shipping in and out of Iranian ports effectively cut off, the country’s oil production has dropped, its currency has depreciated against the US dollar and dozens of job cuts have been reported.
“They can’t pay their troops. The money is empty,” Trump said this week at the White House.
The big question is whether the economic consequences will prove strong enough to force the Iranian regime to accept the Trump administration’s terms of the peace deal, such as ending its nuclear enrichment program and relinquishing control of the Strait of Hormuz.
Edward Fishman, director of the Center for Geoeconomics at the Council on Foreign Relations in New York, says the ban is effective because the Iranian regime is heavily dependent on oil revenues.
“Besides, it has become very difficult for the Iranian government to pay workers, to buy goods from other countries,” Fishman told CBC News.
“This has a huge impact on Iran’s economy,” Fishman said. “Either way, it puts enormous economic pressure on the Iranian government and frankly, the entire Iranian nation.”
When will the damage to the economy increase?
While there is broad agreement among analysts that the embargo will wreak havoc on Iran’s economy, there are differences of opinion about how long it will take for the damage to be more severe.
Two important factors are at play: how much crude oil Iran was able to get out of the sea before the blockade began, and how much oil the country can store before it has nowhere to put its daily production and must start shutting down wells.
Iran has placed at least 140 million barrels in floating tanks across the embargo, much of it awaiting delivery to China, the Wall Street Journal reported in April, citing figures from ship-tracking firm Vortexa.
That is enough to provide Tehran with its pre-war oil revenue levels until at least August, according to a report by the Soufan Center, a New York-based nonprofit research and analysis organization.
President Donald Trump has announced that the United States will use its blockade of the Strait of Hormuz in retaliation for Iran’s de facto blockade, which is now in its seventh week. But, as Andrew Chang explains, responding in this way to Iran’s control of 20 percent of the world’s energy supply could cause several risks as the conflict in the Middle East escalates. CORRECTION (April 16, 2026): A previous version of this video incorrectly used an aerial photograph of the Clarence Strait to show the Strait of Hormuz. The picture has been changed. Images provided by The Canadian Press, Reuters, Adobe Stock and Getty Images
Iran has at least a month’s worth of storage capacity available at current production levels before it needs to cut oil flows, according to the report. Bloomberg reportsciting industry analysts.
What is confidential A CIA analysis provided to Trump administration policymakers this week concluded that Iran could survive a US military blockade for at least three to four months before facing serious economic hardship, The Washington Post reported Thursday.
All of this means that the state may be able to withstand the recession for much longer than the most optimistic time frame set by the president and his cabinet.
‘It works better than bombing’
It’s been 10 days since Trump said on social media that Iran is “in a state of collapse” as a result of the sanctions.
“They are choking like a stuffed pig,” he told Axios the next day, describing the blockade as “more effective than bombing.”
Treasury Secretary Scott Bessent said last week that Iran’s oil production shutdown and fuel shortages are imminent.
“We are strangling the regime,” Bessent said Sunday in an interview with Fox News, predicting that the blockade would force Iran to shut down oil wells “in the next week.”
The truth is that while the ban is having an impact, it is not happening as quickly as Trump and his officials say, or as dramatically as the nickname “Operation Economic Fury” given to the White House suggests.
Fishman says it is not certain that the blockade alone will be enough to force the regime to accept the US demands for a peace agreement.
“The record of governments anywhere in the world struggling under economic pressure is very poor,” he said, citing examples such as Venezuela and Syria, whose rulers endured years of sanctions that destroyed their economies but lost power due to military action.
But Fishman said the blockade “definitely gives the Iranian regime more incentive to negotiate than ever before.”
There is a similar view from Kpler, a company that monitors global commodity markets, which reported a sharp drop in oil loadings at Iran’s main export hub on Kharg Island shortly after the blockade began.
“The fact that Tehran has asked for the embargo to be lifted as a condition for renegotiating the highlights is damaging,” wrote Homayoun Falakshahi, head of crude oil market analysis at Kpler, in a blog post this week.
“While the embargo does not hamper Iran financially right now, it comes with the promise of doing so if it is maintained,” Falakshahi said.
Fernando Ferreira, head of geopolitical risk at Rapidan Energy Group, a market analysis consultancy based in Washington, DC, says the Iranian regime is prepared before being blocked to deal with economic pressure.
“They’re willing to go on for months,” Ferreira told CNBC. “That runway may be longer than Trump envisioned for the results.”
A key factor that helped Iran cope with the blockade: all the extra money that came in due to the rise in world oil prices during the war.
