Six-minute read
More than four months into the confrontation involving Iran and the United States, the conflict appears to have entered a decisive phase. The central question is no longer simply how much military damage either side can inflict. It is whether Tehran can turn prolonged confrontation into a political instrument of survival — or whether sustained economic isolation will expose vulnerabilities that military strikes alone have failed to exploit.
The Iranian regime’s leadership has sought to portray its posture around the Strait of Hormuz as evidence of strength and strategic leverage. By threatening shipping and placing pressure on one of the world’s most important energy corridors, Tehran appears to calculate that it can eventually force Western governments to choose economic stability over confrontation.
At the same time, the political and military restructuring described inside Iran points towards preparation for continued confrontation rather than rapid reconciliation. The appointment by Mojtaba Khamenei of six senior Revolutionary Guard commanders as his representatives is presented by the regime as an effort to consolidate the new leadership structure.
But it can also be read as an attempt to stabilize the leadership structure while preparing the state for a prolonged period of conflict.
Mohsen Rezaei is now Secretary of the Iranian regime’s Supreme National Security Council.
The same man who, as #IRGC founder and commander:
• Sent tens of thousands of children to clear minefields
• Helped plan the 1994 AMIA bombing (@INTERPOL_HQ red notice)
• Oversaw…— NCRI-FAC (@iran_policy) August 10, 2026
A Strategy of Permanent Crisis
At the heart of Tehran’s calculation is a paradox: war is enormously costly, yet a prolonged external crisis serves the regime politically.
An end to confrontation would inevitably redirect public attention towards conditions inside Iran — inflation, unemployment, collapsing purchasing power, corruption, shortages and political repression. The leadership therefore has an incentive to maintain an atmosphere in which national security can be invoked to justify greater controls at home.
This calculation becomes especially important when viewed alongside the persistence of organized opposition and recurring protests inside the country. The regime is not operating in a politically passive society. It faces an organized resistance network, the MEK’s Resistance Units, which continue to organize and expand their activities across Iran, alongside broader social discontent among workers, pensioners, students, farmers, professionals and sections of the urban middle class.
The regime’s leadership therefore believes that so long as the confrontation remains external, it can manage the internal consequences. Its assumption appears to be that air strikes, missile attacks or even severe military losses will not by themselves bring down the system unless they are accompanied by a domestic political rupture or a direct military campaign aimed at regime change.
From this perspective, permanent crisis is not simply something Tehran endures. It becomes part of its survival strategy.
The Strait of Hormuz as Leverage
The Strait of Hormuz is central to that strategy because it gives Tehran a means of extending the cost of confrontation far beyond Iran.
Any sustained disruption to shipping can affect energy markets, insurance costs, transport routes and the broader global economy. Tehran’s apparent calculation is that once those costs become sufficiently painful, Washington and its allies will come under pressure to make concessions.
That would follow a familiar pattern: escalate the price of confrontation, create fear of wider economic disruption and then seek negotiations from a position of manufactured leverage.
This is why the regime resumed hostile activity around shipping even after the MoU was signed — an indication that Tehran regarded de-escalation not as an end in itself, but as another stage in a wider struggle for leverage.
But this strategy contains a serious weakness.
If the United States responds not with escalating bombardment, but with a sustained naval blockade and broader economic containment, Tehran’s most important source of resilience — oil revenue — comes under direct pressure.
And that may be far more dangerous to the regime than the destruction of another military installation.
Why Economic Containment Could Hurt More Than Bombs
Military strikes can destroy missile sites, bases and equipment. But authoritarian systems can often absorb physical losses, rebuild facilities and present destruction as evidence of foreign aggression.
Economic strangulation works differently.
A serious restriction on oil exports affects the regime’s ability to finance virtually every pillar of its power: the state bureaucracy, the Revolutionary Guards, security institutions, regional proxies, weapons programmes and the networks of proxies.
The earlier naval blockade was one of the principal factors pushing Tehran towards negotiations. If such pressure is maintained, the consequences could therefore extend far beyond the energy sector.
Iran entered the present stage of confrontation with an economy already under extraordinary stress.
Central Bank figures cited in the material put the twelve-month inflation rate through the end of March 2026 at 53.7 per cent, while point-to-point inflation reached 73.5 per cent. Domestic economic analysis cited three possible trajectories: even under an agreement with the United States, inflation was projected to remain exceptionally high; a prolonged “neither war nor peace” environment would drive it still higher; renewed open conflict was projected to risk triple-digit inflation.
While the clerical regime projects defiance abroad, its officials and media daily expose a state paralyzed by #economic collapse, factional fights over survival, and murderous efforts to delay an imminent nationwide uprising.
By @shahriarkiahttps://t.co/eM5MbtiUOJ— NCRI-FAC (@iran_policy) August 6, 2026
The currency crisis has been equally severe. The material reports the free-market dollar rising above 181,000 tomans in late April, accompanied by sharp increases in the price of gold and other safe-haven assets.
For ordinary Iranians, these are not abstract economic indicators. They determine whether families can buy food.
Sugar prices rose sharply in a matter of weeks. Eggs became prohibitively expensive for many households. Reports cited in the document describe families selling gold and personal assets to meet daily expenses, while the government introduced a scheme allowing subsidy recipients effectively to purchase essentials on credit against future welfare payments.
That is an extraordinary sign of economic fragility: future subsidies are being consumed merely to finance present-day survival.
Sanctions Are Not the Whole Explanation
Tehran has long blamed sanctions for the deterioration in living standards, but sanctions are not the principal cause of the economic hardship endured by the Iranian people. Iran possesses some of the world’s largest oil and natural-gas reserves and has had access to enormous national resources. The fundamental problem is the regime’s deliberate allocation of those resources away from the basic needs of the population. Vast sums have instead been channelled into military programmes, regional interventions, proxy groups, missile and nuclear projects, and institutions linked to the Revolutionary Guards, while essential public needs, wages and household purchasing power have been neglected. The result is an economy in which ordinary Iranians bear the cost not primarily of a lack of national wealth, but of the regime’s political and budgetary priorities.
The experience of the past several years reinforces this point. Whenever substantial financial resources have become available to Tehran, the regime has consistently prioritized its nuclear and missile programmes, the Revolutionary Guards, domestic repression and the financing of proxy forces abroad rather than directing those resources towards the basic needs and living standards of the Iranian people.
The period following the 2015 nuclear agreement is particularly revealing. Billions of dollars in previously restricted Iranian assets became accessible, yet the additional resources did not translate into improved living conditions for ordinary Iranians. Instead, the regime continued to pour money into its military and nuclear programmes, the Revolutionary Guards, its security apparatus and regional proxy networks. Far from improving, the economic situation facing ordinary households continued to deteriorate.
Within roughly a year, worsening economic conditions and mounting public frustration began feeding a new wave of protests that ultimately developed into nationwide uprisings against the regime. The lesson is therefore clear: the central issue is not simply whether money enters Iran, but how the ruling establishment chooses to spend it. The record of the years following the nuclear agreement demonstrates that additional revenues do not reach the Iranian people when the regime’s political, military and security priorities continue to take precedence over their basic economic needs.
"A leader who merely ratifies is a leader who can be replaced by another ratifier. #Peace would retire the emergency that crowned him; war keeps grinding the economy that could bury him," Farid Mahoutchi writes.https://t.co/30kNzyCW3O
— NCRI-FAC (@iran_policy) August 8, 2026
Repression Cannot Solve the Economic Equation
The regime has repeatedly demonstrated that it possesses an extensive coercive apparatus and is willing to use it. But repression has limitations.
Security forces can disperse a demonstration. They can arrest activists, restrict the internet and impose fear. What they cannot do is order food prices to fall, restore the value of wages, refill depleted reservoirs or create foreign currency revenue that no longer exists.
That distinction is crucial. The more the state relies on coercion while failing to reverse economic decline, the more repression itself becomes evidence that the political system has run out of non-coercive solutions.
The sustained protests involving pensioners, workers, students, nurses, bakers, farmers and truck drivers may differ in their immediate demands, but collectively they reveal a society increasingly on the verge of explosion.
Tehran’s Strategic Miscalculation
The Iranian regime’s leadership may therefore be correct about one thing: military bombing alone is unlikely to overthrow the regime.
Where its calculation may fail is in assuming that prolonged confrontation necessarily works in its favour.
A sustained external crisis can help justify repression. But if that same crisis progressively deprives the state of oil revenue, restricts the resources available to the security apparatus and intensifies public anger, the instrument intended to preserve the regime can begin undermining it.
This is why economic containment may prove strategically more consequential than repeated military strikes.
Iran today faces not one crisis but several interconnected crises: fiscal, monetary, environmental, political and social. It is a country in which the currency cannot hold its value, household purchasing power is collapsing, water resources are being exhausted, capital is leaving, and popular protests continue despite repression.
The decisive struggle may therefore not be fought in the skies over Iran or in missile exchanges across the region.
It may be decided by whether the ruling establishment can continue paying the financial cost of its own survival.
If naval blockade substantially restricts Tehran’s ability to export oil and obtain usable revenue, the pressure will move steadily from the battlefield into the foundations of the state itself. And in a country already experiencing severe economic decline and persistent political discontent, that could be the pressure the regime finds hardest to absorb.
The Iranian regime’s leadership has spent decades preparing to survive military attacks. It is far less prepared to survive the combination of economic paralysis and another nationwide uprising.