Iran's foreign trade is contracting sharply as American sanctions and a naval blockade take a heavy toll on the country's economy. Imports and exports have fallen by between 25% and 35%, according to new data, in a sign that Washington's pressure campaign is severely restricting the Islamic Republic's ability to trade on global markets.
The decline is most visible in the oil sector, Iran's economic lifeline. Crude exports, which account for the bulk of government revenue, have collapsed as US enforcement actions target tankers, insurers, and payment channels. The naval blockade, which has been tightened in recent months, is intercepting vessels suspected of carrying Iranian cargo, further choking trade routes that are already constrained by sanctions.
The economic squeeze comes at a politically sensitive time. Supreme Leader Mojtaba Khamenei, who has taken an increasingly direct role in economic policy, is now calling for a structural shift in how Iran manages its finances. He has urged a gradual reduction in the role of the dollar in Iran's external transactions and a stronger orientation toward domestic production, arguing that reliance on foreign markets leaves the country vulnerable to external pressure.
Khamenei's remarks signal a strategic pivot in Tehran's economic thinking. By reducing dependence on dollar-denominated trade, Iran hopes to insulate itself from the effects of US sanctions, which have repeatedly targeted the country's access to the global financial system. The push for import substitution is also intended to shield local industries from competition and to build resilience in sectors where Iran has historically relied on foreign suppliers.
The practical impact of these policies, however, remains uncertain. Iran's economy is heavily integrated with regional trading partners, particularly China, which has continued to purchase Iranian oil despite US pressure. A rapid move away from dollar transactions could complicate those relationships, as many international commodities, including oil, are priced and settled in dollars. Analysts note that while barter arrangements and non-dollar settlement mechanisms exist, they are limited in scale and cannot easily replace the liquidity of dollar-based trade.
The contraction in trade is already being felt across the Iranian economy. Importers face higher costs and longer delays as shipping routes are disrupted and financing becomes harder to secure. Domestic manufacturers, who rely on imported raw materials and components, are struggling to maintain production levels. Consumers, meanwhile, are seeing prices rise as shortages emerge in some markets.
The situation is likely to intensify in the coming months. The US administration has signalled that it intends to maintain and even strengthen enforcement of sanctions, while Tehran shows no sign of returning to the negotiating table. For British businesses and policymakers, the developments underscore the risks of operating in a region where economic statecraft is increasingly weaponised. The collapse of Iranian trade also has implications for global energy markets, as reduced Iranian supply tightens the balance between demand and available crude.
For now, Iran's leadership appears committed to a strategy of economic self-reliance, even at the cost of deeper isolation. Whether that strategy can stabilise the economy remains an open question, but the immediate trajectory is clear: Iranian trade is shrinking, and the pressure shows no sign of easing.