Iran's economy is sensitive to Trump headlines but its problems run deeper

Commentator in Tehran are warning that Iran’s economy has become to dependent on news from Washington, with markets reacting sharply even to personnel changes in the US president’s inner circle.

Iran's official strategy to jumpstart a sputtering economy must look beyond talks with Washington and address root problems, several analysts and editorials have said.

“The reality is that our economy reacts intensely to political developments,” former central bank deputy Kamal Seyyed-Ali told reporters in Tehran. “If the possibility of a full-scale war rises again, the dollar rate will once again break records.”

Seyyed-Ali, a senior economist, pointed to a March spike in the dollar-to-rial exchange rate—reaching 1.05 million—after Donald Trump warned of possible military action if Tehran refused to negotiate.

The rate dropped when talks began in Oman, then crept back up when negotiations stalled. This increasing sensitivity, he said, underscores how economic expectations in Iran have become “tethered to political headlines.”

Policymakers and markets alike, he added, are behaving as if diplomacy with Washington will dictate the fate of the economy.

The hardline daily Kayhan recently questioned the government’s economic strategy, asking in a published commentary: “What is the government doing besides negotiating with the United States?”

The paper argued that diplomacy should be a tool to improve economic performance, not a substitute for internal reform.

Inflated hopes for a post-deal recovery have masked structural failings—among them, a banking system in crisis, outdated industry, underinvestment in agriculture, and widespread dysfunction in pensions and public services.

Repeated blackouts caused by power shortages have disrupted everything from water distribution to digital connectivity, triggering price hikes in housing, transport, and healthcare.

Energy Minister Abbas Aliabadi admitted in April that Iran’s power plants can generate only 65,000 megawatts against annual demand of more than 85,000. A vicious cycle compounds the problem: water shortages disable power plants, while power cuts prevent water distribution.

Citizens have voiced growing anger through Persian-language media abroad. Callers to Iran International describe how outages in major cities now affect phone signals, Internet access, and even access to clean water.

The latest round of US sanctions targets the petrochemical sector—already plagued by multi-billion-dollar corruption scandals. While the judiciary has acknowledged these cases, many remain suppressed or unresolved, a fact critics say reflects both impunity and systemic failure.

Despite poor growth and repeated economic shocks—Iran’s industrial output contracted 1.6% in January—officials continue to blame sanctions alone. Few in power acknowledge the depth of mismanagement. Instead, each government accuses its predecessor, avoiding accountability as public frustration mounts.

Even if sanctions are eased, economists say, Iran’s crisis will not be resolved by diplomacy alone. Without tackling the roots—corruption, dysfunction, and decay—any recovery will be fragile, temporary, and externally dependent.