A race is on to see whose economy breaks first in the war with Iran.
President Donald Trump is using a U.S. naval blockade to slowly strangle Iran’s economy to force the country’s leaders to relent — a process that could take weeks or even months. Meanwhile, Iran is betting that its closure of the Strait of Hormuz will send oil prices soaring and inflict enough pain on the U.S. economy to force Trump to back down — a risk that oil analysts say could be just a few weeks away from playing out.
Who blinks first in the standoff could determine whether the eight-week war ends soon or escalates into something worse. It is a new stage of a conflict that points to prolonged pain for Iranians, Americans and a global economy that is being starved of critical energy supplies.
“The battlefield has moved from the military to the economy, for right now,” said Dan Pickering of Pickering Energy Partners, an energy-focused financial services platform. “We’ve stopped dropping bombs, and now we’re just trying to squeeze each other. And I think both sides are probably showing more resilience than you would have expected.”
But Iran has the clear advantage when it comes to enduring economic pain, most experts on the global oil trade and Iran’s economy told MS NOW.
“The Iranian economy obviously has been sanctioned, isolated for a long time,” said Alex Vatanka, a senior fellow at the Middle East Institute. “It’s a regime that doesn’t really care that much in terms of public opinion in Iran, or it doesn’t have to, doesn’t feel it needs to answer to its own people. So it’s positioned much better than the United States as a democracy where public opinion matters. People’s anger will be felt at a political level.”
Aaron David Miller, a senior fellow at the Carnegie Endowment for International Peace and veteran Middle East expert, agreed that Iran’s authoritarian regime, which recently killed up to 30,000 pro-democracy protesters, could endure more economic pain because it is not answerable to its people. “There is no political accountability,” he said.
Pickering added that the U.S. fumbled its own economic leverage by delaying the blockade.
“This has been squeezing the globe financially longer than it’s been squeezing Iran because the U.S. didn’t want to take those extra barrels off the market, and they allowed them to be produced even while we were bombing them,” he said. “My fear is the Iranians have more staying power than the U.S.”
But Robin Brooks, a fellow at the Brookings Institution and former foreign exchange strategist at Goldman Sachs, predicted that the U.S. could endure more economic pain than Iran.
“The consensus is that Iran has more leverage because the regime doesn’t care about the welfare of its own people, but I think that’s debatable,” Brooks told MS NOW, acknowledging that other experts disagree with him. “The blockade has a medium-term effect via lower oil exports and a short-term effect via panic and capital flight. This panic channel hits now and compounds all the damage the war has done to Iran. So Iran is vulnerable.”
Others are skeptical that panic will materialize. Ellen Wald, senior fellow at the Atlantic Council’s Global Energy Center, argued that Iran’s decades under sanctions have made the country unusually tolerant of economic hardship.
“Iran’s economy has been under duress for decades,” Wald told MS NOW. “Iranians and Iran, they’re very used to sacrifice, and so I think that their ability to tolerate economic hardship is greater than other economies in the world.” At the same time, Wald noted the U.S. is more insulated from the global effects since it is less reliant on oil from the Persian Gulf, and thus, “the pressure to blink will not be as great.”
The U.S. blockade will eventually cut off Iran’s oil revenues, said Barbara Leaf, a former career foreign service officer who served as the Biden administration’s top State Department official for the Middle East. But decades of sanctions — including sweeping ones imposed by Trump in 2018 — have made parts of Iran’s economy far less dependent on foreign trade and more resilient to external shocks.
The more pressing concern, Leaf argued, is a “ticking clock” on the American side: If the Strait of Hormuz remains closed past the end of April, she said, shortages of gasoline, other refined products and fertilizer already spreading through Asia and other parts of the world will begin arriving in the U.S. as significant price shocks.
“They’ve been under lacerating sanctions since 2018,” Leaf told MS NOW, referring to Iran. “I just don’t see them breaking fast enough compared to the ticking clock on our side of the table.”
On Thursday, Trump scoffed at reporting that he is “anxious” to end the war with Iran.
“Please be advised that I am possibly the least pressured person ever to be in this position,” the president wrote on Truth Social.” I have all the time in the World, but Iran doesn’t — The clock is ticking!”
The clock is what Pickering is watching most closely. He does not think Trump can fold now that Iran has learned it can wield the Strait of Hormuz as a lever of influence — but $5-a-gallon gasoline, potentially just a month or two away, could pressure the president to change course.
“That, to me, is just so visible and so prevalent for everyone that it’s going to force the change in strategy,” Pickering told MS NOW. “For the Iranians, we don’t know yet how bad is bad, but I think their willingness to allow their people to feel pain is probably fairly high at this point.”
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