Trump’s Iran strategy depends on economic pain. The pain is mounting

(CNN) — Deepening poverty, rising household debt, rampant inflation, hidden unemployment.

The indicators for Iran’s economy signal a deepening crisis on multiple fronts – and at least one official news outlet is not shy about reporting it.

On Sunday, US President Donald Trump made clear that inflicting economic pain on Iran is part of Washington’s strategy.

“We are only semi-negotiating with (Iran). We are just watching Iran with its huge inflation and the fact they have no money,” he said.

The state of Iran’s economy suggests that calculation may not be misplaced.

“Workers are constantly indebted to everyone and everything,” according to the Iranian Labour News Agency (ILNA).

Hossein, a 35-year-old in Tehran who lives with his family, told the agency that he now used “credit apps” on daily commuting or buying a small meal.

President Masoud Pezeshkian has frequently warned of the social consequences of Iran’s economic meltdown, and even state media acknowledge the risk of renewed social unrest.

As long as inflation, unemployment, declining purchasing power and a sense of inequality persist, “social discontent will continue to reproduce itself,” state news agency IRNA reported last month.

Earnings are certainly not keeping up with inflation, according to government statistics. The rate of inflation for food has soared by nearly 130% over the past 12 months; the wages of low-paid workers have grown by less than half of that.

The government has recently warned it may add to the pain by reducing gasoline subsidies, which would trigger a new wave of inflation and potentially lead to higher unemployment.

In the past, raising the price of gasoline triggered protests.

“Our economy today is like a patient suffering from severe bleeding,” according to Albert Baghzian, professor of economics at Tehran University. “Introducing a gasoline shock is akin to delivering a fatal blow to livelihoods,” he told ILNA.

The International Monetary Fund has projected that the Iranian economy will shrink 6% this year, largely due to lost output and physical damage caused by the conflict. At the scale of a national economy, that figure represents an enormous destruction of wealth and livelihoods.

Even a swift resolution of the conflict with the United States would take months to feed into a better economic picture, according to analysts.

Tehran could secure “up to $20 billion of frozen assets, $8 billion a year from a US oil-sales license, and $5-10 billion a year from Strait of Hormuz fees,” according to the Eurasia Group, a think tank.

But “every revenue source carries a serious risk that Washington could shut it off, as it has done before,” Eurasia added.

Buying food on borrowed money

In the meantime, the cost of survival for millions of Iranians just gets higher as the war grinds on.

“Buying food and medicine on installment is no longer a sign of welfare, but an alarm bell of a serious crisis,” ILNA reported this month.

Essentially people are kicking their financial problems down the road.

One 29-year -old part-time editor in Tehran told ILNA that he uses dozens of micro-credit apps “because you can’t afford to pay for it all at once.”

Other workers told ILNA that 40% of their wages are going on rent and another 40% to paying credit instalments.

ILNA said the use of credit apps was also growing among students facing “an uncertain employment outlook (and) unstable income.”

And the app users face fines and fees if they don’t meet repayment deadlines.

“These fines keep piling up. The fear of not having money and falling behind on instalments really tortures a person,” Hossein told ILNA.

Workers focused solely on ‘staying alive’

Many Iranians are on temporary contracts or drift in and out of work, meaning they are even less likely to keep up with repayments. Few have health insurance – and any medical issue can wipe out their income, according to workers who spoke with ILNA.

Rent inflation has also driven thousands to cheaper accommodation on the edge of cities.

The costs of residential construction have doubled in the last year, according to official data – and that feeds through to the rental market. Some local authorities have tried to cap rent increases – in Tehran province to 27% – but such limits are often flouted.

“Rents are continuing to rise, construction costs have surged, purchasing power has weakened and housing transactions remain depressed,” reported another semi-official outlet, ISNA.

Workers’ groups say the government has forgotten them in the midst of the war.

“Iranian workers — and construction workers in particular — have been forgotten and left defenseless to the whims of fate,” said Hassan Ezzati, head of the Baneh Construction Workers’ Trade Association.

“Their efforts are focused on one thing and one thing only: staying alive.”

Ezzati estimated half the construction workforce in Baneh, near Tehran, had no health insurance. Some were so desperate for money that they picked up work as kolbari – smuggling across Iran’s borders, sometimes through minefields from the decade-long Iran-Iraq war in the 1980s.

It may be that the Trump administration sees economic desperation as a more likely tool in forcing Iran to compromise than missiles and bombs.

Trump is betting on economic pressure

As negotiations on the Strait of Hormuz drag on, the White House appears to believe that time – and Iran’s deteriorating economy – is on its side.

US Treasury Secretary Scott Bessent said last week that over time, Iran’s leverage in the strait of Hormuz would erode as other countries build pipelines to avoid the chokepoint.

Israel’s far-right Finance Minister, Bezalel Smotrich, has argued that destroying Iran’s economy offers the most effective route towards overthrowing the regime.

The US has huge economic leverage over Iran through sanctions and the ability to block or limit the release of its frozen overseas assets.

“The proceeds from a deal would ease fiscal pressure but would not fully address the public’s deep economic grievances, so political control will still rest on force,” Eurasia concluded.

The published 2026 budget already cuts real spending by 38%.

There is – or at least has been – one bright spot: oil exports. The budget this year targeted exports of 1.77 million barrels per day (bpd) at $55 per barrel. Exports have averaged 1.6 million bpd so far, but at prices in the low $80s.

That silver lining may not last as the US naval blockade bites. No oil has been exported from Kharg Island since the end of July, according to shipping data.

The irony is not lost on labor activist Hassan Ezzati.

“In a country rich in both surface and underground natural resources, the story of workers’ lives is an endless chronicle of suffering,” he told ILNA.