What sanctions cost Iranians

In September 2026 not one barrel of Iranian crude was loaded onto a tanker. That had not happened since the war began in February. An American naval blockade has turned back every cargo since mid-July. On August 24th the Treasury piled on with Operation Economic Outcast, which the administration has billed as "Economic D-Day": sanctions on nearly 60 people, firms and ships, and a threat to anyone still dealing with Iran in digital assets, technology, gold, aviation or shipping.

Iran has lived under sanctions since 1979, so there is a record to consult. Twice in the past 15 years its oil has been cut off, though never completely. What happened to households then is the best available guide to what happens now.

Follow the oil

The first cut came in 2012, when the European Union stopped buying Iranian oil and Iran's banks were thrown off SWIFT, the network through which banks send payments. Exports halved. The second came in 2018, when America left the nuclear deal and promised "maximum pressure". Exports fell by more than 70%.

How much poorer did that make Iranians? One way to tell is to build a twin. We blended 29 oil-producing countries that were neither at war nor under heavy sanctions, weighting them so that the blend's income per person tracked Iran's from 1995 to 2011. Three years into the first squeeze Iran was 13% poorer than its twin. Two years into the second it was 14% poorer. Both times the gap narrowed when the oil flowed again: under the nuclear deal in 2016-17, and after 2020 as Chinese refiners bought Iranian crude at a discount.

Households fared worse than the economy as a whole. Consumption per person fell by 8% between 2011 and 2015 and by 16% between 2017 and 2020. In 2025 it was still 11% below its level of 14 years earlier. Inflation, which was already 11 percentage points above that of comparable oil producers, has run 36 points above it since 2019. Nor was the state spared. Official military spending fell by 26% in 2017-19, a steeper drop than households suffered.

The pattern reduces to a rule of thumb. When Iran's oil revenue halves, household consumption grows three to five percentage points more slowly that year. We estimated the relationship 60 different ways on data since 1981 and it held in all of them. Whether sanctions were formally in force made no reliable difference on top. Laws on paper do not impoverish Iranians. Lost oil money does.

A war as well

This time there are bombs too. The war began on February 28th with American and Israeli strikes, and the rial has kept the diary. A dollar cost 1.35m rials at the end of 2025, 1.66m on the eve of the war and 1.95m on the eve of Economic Outcast. By September 30th it cost 2.6m: the currency has lost 48% of its value this year. Prices in September were 89.8% higher than a year earlier, by the Statistical Centre's count; the central bank puts the figure at 84%. Iran's own statisticians say that GDP in the spring was 10.1% lower than a year before.

Oddly, little of this is yet the work of the blockade. The oil price leapt when the fighting started, so we estimate that Iran's oil revenue in 2026 will be only about a fifth lower than in 2025. By our rule of thumb that should have left household consumption roughly flat. We reckon it has fallen by about 5%. The difference is the war itself: wrecked factories, blocked imports, lost jobs.

The oil shock is still on its way. Crude that was already at sea when the blockade resumed has kept some money coming in. But that floating stock shrank from about 90m barrels in July to 15m by late September, according to Kpler, a data firm, and the Wall Street Journal reports that payments may largely dry up by mid-December.

Three ways from here

Whether the blockade holds is a question for admirals and diplomats, not for models. So we offer three scenarios for 2027 in place of one forecast. Each rests on the only relationship that beat a naive guess when we tested it against every year since 2008: household consumption follows oil revenue. To that we add a penalty for time spent at war, drawn from the Iran-Iraq war of the 1980s.

Sources: World Bank; IMF; Statistical Centre of Iran; Signum Average calculations

If the blockade holds and the fighting continues, our central projection is that the average Iranian consumes 13% less in 2027 than in 2025. That would be the lowest level since 2003, and more than a fifth below the peak of 2011. If the blockade leaks, as sanctions did after 2019, the fall is 9%. A deal by spring would stop the decline but not reverse it within the year. The ranges are wide and they overlap. The gap between blockade and deal, about eight points, is better established than the level of either.

If anything these numbers flatter the blockade. Iran's oil revenue has never fallen by more than 66% in a year. A total stop would be worse, but a model can be shown only what has happened before. And bombs destroy things that take years to replace. An early estimate by the Foundation for Defense of Democracies, a hawkish American think-tank, puts the physical damage at $91bn by April, about half of it military. The civilian half is roughly 2% of everything Iran has built, enough to cut what the economy can produce by about 1% until it is repaired; even counting the weapons, the loss is under 2.5%.

Prices are harder to predict, and we do not try. Simple arithmetic is alarming enough. At September's monthly pace prices rise by 64% in a year; at May's, by 175%. A government that has lost its oil income tends to print money, which points to the upper end.

What would a deal take? History offers one precedent. In 2015 Iran accepted verified limits on its nuclear programme in exchange for relief. Within a year its oil exports had risen from 1.2m barrels a day to 1.8m, and within two its income per person was up by 9%. The same bargain is harder to strike now. Inspectors have been unable to verify Iran's stockpile of enriched uranium since June 2025, and limits are hard to trade when nobody can count what is being limited.

Sanctions were meant to change how Iran's rulers behave. What they have reliably changed is what Iranians can afford. We will return to these projections when the figures for 2026 and 2027 are published, and report how they fared.

This article was revised and shortened on October 2nd 2026, and corrected on October 5th after a check of its figures against their sources. The full report, with the record of sanctions since 1979 and the methods in detail, is available on request.