Iran leaders sound economic alarms under Trump’s Economic D-Day

The Houthis’ position distinguishes them from other members of Iran’s regional network, Al-Basha said. The group seized Sanaa in 2014 and became the de facto government, inheriting the conventional military of North Yemen while taking control of territory containing roughly 80 percent of the population.

“So you’re not just talking about a militia or an insurgency; they became a de facto authority,” Al-Basha said.

That combination of territorial control, state institutions and geography has given the Houthis advantages that Hezbollah and Iran-backed groups in Iraq do not possess, he said.

Iraqi armed groups wield significant influence but do not control the government, while Lebanon’s Hezbollah has operated as a powerful armed and political force within Lebanon rather than as the state itself.

The Houthis also sit along the Red Sea and Bab al-Mandab, one of the world’s most important maritime chokepoints, while Yemen’s mountainous terrain and extensive tunnel systems make the group difficult to target from the air.

Those factors have given the Houthis “an edge” and made them “more effective as an ally for Iran than Hezbollah,” Al-Basha said.

The comparison comes as other parts of Iran’s regional network have been weakened. Al-Basha said the so-called Axis of Resistance is weaker than it was before the October 7, 2023 Hamas attack on Israel, pointing to pressure on Hamas and Hezbollah and the fall of Bashar al-Assad’s government in Syria, which severed a key land route between Iran and its Lebanese ally.

Iran’s military backing

Iran, meanwhile, has invested heavily in the military capabilities that make the Houthis’ strategic position consequential. Al-Basha said Tehran has provided anti-ship ballistic missiles, anti-ship cruise missiles, land-attack cruise missiles and long-range drones, while the Islamic Revolutionary Guard Corps and its Quds Force remain central to the relationship.

“The Houthis will not be as strong as they are today without Iran,” Al-Basha said.

He said intercepted shipments heading toward Yemen continue to demonstrate the importance of Iranian support, including components for weapons the Houthis have presented as domestically produced. The group has developed some local manufacturing and assembly capabilities, he said, but Iranian support remains particularly important to its advanced missile and drone arsenal.

The relationship differs from Tehran’s former model with Hezbollah in another significant respect. Al-Basha said Iran has not generally provided the Houthis with financial support on the scale it once provided the Lebanese group. Tehran at times supplied discounted cooking gas and crude through Iraqi and secondary markets that the Houthis could resell, he said, but its most important contribution has been weapons.

100%

Reports coming out of Yemen also indicate that an Iranian ambassador and a Quds Force representative have returned to Houthi-controlled territory, Al-Basha said. He said the ambassador has appeared in public photographs, while the Quds Force representative also appears to be back, with both widely understood to coordinate the relationship between Tehran and the Houthi leadership.

“Their natural partners are the Quds Force and the Guard,” Al-Basha said.

He contrasted Iran’s military support with a Saudi convoy he had recently seen carrying heavy equipment for power stations into Yemen. Iran, he said, has provided drones and ballistic missiles rather than power, electricity or food for Yemenis.

Al-Basha also described the relationship as increasingly public. He pointed to Houthi-linked delegations attending the funeral of Iran’s late supreme leader and subsequent Iranian engagement with the Houthi authorities as signs that ties once conducted more covertly are becoming increasingly visible.

An agenda of their own

The Houthis, however, are not simply acting on Tehran’s behalf. Al-Basha said they deliberately chose the current confrontation to support Iran while simultaneously exploiting changes in regional shipping to pursue their own objectives against Saudi Arabia.

With shipping through the Strait of Hormuz disrupted, Saudi Arabia has been forced to move more crude through its east-west pipeline toward the Red Sea, increasing the strategic importance of Bab al-Mandab, he said. The Houthis saw an opportunity to increase pressure on Riyadh and the international community at a moment when their own finances are strained.

Al-Basha said Iran had invested in the Houthis’ ballistic missile and drone programs, creating an expectation that they would support Tehran. But the timing also serves the Houthis’ interests as they seek greater control over airspace and shipping access as well as financial concessions from Saudi Arabia.

The group is seeking around $100 million a month in salary support and billions of dollars in reparations, Al-Basha said. Iran International has previously reported on a Houthi maritime embargo against Saudi-linked shipping and the diversion of Saudi tankers away from Bab al-Mandab.

The financial demands come as the Houthis struggle to sustain the areas they control. Al-Basha said the group collects revenue from ports, communications, aviation, taxation and customs, but much of that income is being prioritized for the war effort.

He cited signs of financial distress including the leasing of endowment properties around mosques and government offices to generate revenue. He also described people fighting over food at public events and eating from garbage, while noting that an online “I am hungry” campaign was visible but not as widespread as some accounts suggested.

That economic pressure is part of what is driving the current confrontation with Saudi Arabia, Al-Basha said. The Houthis calculate that Riyadh has more to lose from another major war in Yemen and can therefore be pressured into paying for a return to calm.

“Houthis know they have nothing to lose, and that’s why they’re going all in against Saudi Arabia,” he said. “They know that Saudi has a lot to lose.”

Bab al-Mandab leverage

The group’s ambitions extend beyond extracting financial concessions. Al-Basha described control of Bab al-Mandab as the “crown jewel” of its current military campaign, saying taking the strait would strengthen the Houthis against Yemeni government forces and give them a more direct means of threatening maritime traffic.

“They have fire control over the Red Sea,” Al-Basha said, but physical control of Bab al-Mandab would mean “you don’t need any more drones, missiles to threaten the ships. You could just send out a boat.”

Al-Basha said the Houthis also have ambitions beyond Yemen, describing an “expansionist model” that includes activity in the Horn of Africa and recruitment in Sudan. He cautioned against underestimating the group’s own power, saying it derives not only from Iranian support but from its determination, political agenda and broader ambitions.

100%

For now, the Houthis have also been careful to avoid bringing the United States directly into their confrontation with Saudi Arabia. Al-Basha said they are not attacking US assets and have emphasized that they are not completely closing Bab al-Mandab, allowing them to exert pressure while limiting the risk of an immediate US response.

“If they will continue attacking Saudi Arabia and continuing to be very disruptive, sooner or later US will be dragged into this war,” Al-Basha said.

For Tehran, the Houthis now offer something increasingly difficult to replicate elsewhere in its regional network: an allied armed movement that also controls territory, institutions and a substantial military structure beside a critical global shipping route.

Iranian weapons remain central to that power, Al-Basha said, but the Houthis have their own revenue sources, political objectives and regional ambitions. It is that combination of Iranian military support and independent territorial power that, in his assessment, has made them a more effective ally for Tehran than Hezbollah.

More than 80% of liquid cargo transits through the strait over the past two weeks either used the Omani route or traveled with transponders switched off and likely followed that path, CNN reported, citing Kpler, which tracks ships using transponder and satellite data.

The US military is meanwhile quietly operating a shipping corridor along the Omani side of the strait that is helping move about 10 million barrels of oil a day, Axios reported, citing two US officials.

“It increasingly looks like Iran has at least partially lost control of the strait,” Homayoun Falakshahi, Kpler’s head of crude oil analysis, told CNN.

US organizes traffic along Oman

The US operation has been underway for several weeks, with 15 to 20 tankers entering and leaving the strait each night through a southern channel along Oman’s coast, the two US officials told Axios.

The effort goes beyond moving outbound oil shipments. The US military is helping empty tankers enter the Persian Gulf from the Arabian Sea, travel to ports in the UAE, Bahrain and Kuwait to load oil and then exit through the strait, according to Axios.

A task force run from the US Army’s 82nd Airborne Division headquarters at Fort Bragg coordinates daily inbound and outbound traffic with regional Gulf partners, Axios reported. US fighter jets patrol above the route to intercept Iranian cruise missiles and drones.

“We have been controlling the southern lane of the Strait of Hormuz for two months now. The Islamic Revolutionary Guard Corps can be a nuisance, but they don't control the strait. We do,” a US official with direct knowledge of the operation told Axios.

The growing use of the Omani route has also reduced Iran’s ability to collect tolls from vessels passing through the strait as it did earlier in the war, according to Kpler.

Ali Gholhaki, a political activist close to Iranian parliament speaker and top negotiator Mohammad Bagher Ghalibaf, said in a post on X that the United States had used specialized vessels to clear sharp rocks along the southern, Omani side of the Strait of Hormuz to facilitate traffic through the corridor.

“The quiet transfer of oil by the United States through the southern Strait of Hormuz will reduce the strait’s leverage,” he wrote, adding that if the arrangement continued, Washington would have little incentive to lift its blockade, ease sanctions or release frozen funds.

Trump says blockade is working

Trump said Wednesday the strait remained open and described the US naval blockade of Iran as “100% successful.”

“Right now, the Strait is open. A lot of boats are coming through,” Trump told reporters at the White House.

“The blockade has been 100% successful. No boats have gotten into Iran, but they are getting in for other places,” he said.

US Central Command said Wednesday that US forces had redirected 65 commercial vessels, disabled three and boarded two as part of enforcement of the blockade against Iran.

Iran has nevertheless continued attacking vessels using the waterway, according to CNN. The continued attacks leave control of the strait contested even as recent shipping patterns indicate Tehran has less ability to dictate traffic than it did earlier in the war.

Washington weighs further pressure

The erosion of Iran’s leverage in the Strait of Hormuz comes as Washington considers tightening economic pressure on Tehran further.

Trump said Wednesday the United States was weighing additional sanctions on Iran.

“We have things that we could sanction. We have very draconian sanctions, and we’ll see what happens,” he told reporters.

Treasury Secretary Scott Bessent also signaled tougher measures last week, telling Newsmax that Washington would apply measures against Iran that had “never been seen” in the economic isolation of a country.

Trump also argued that Hormuz could become less important to global energy markets as countries turn to alternative oil supplies and new pipelines.

“People have found other alternatives, which they never thought about: Texas, Alaska, Louisiana, and other places,” he said.

“So I think the Hormuz Strait is not going to be quite as important as it was in the past,” Trump added.

Trump also said Wednesday that Iran could not be allowed to obtain a nuclear weapon.

“Iran cannot have a nuclear weapon. You know why? Because they would use it. We are not gonna let them use it,” he said.

For now, the growing use of the Oman-side route and the US-organized corridor point to a significant erosion of Iran’s leverage over Hormuz, while continued Iranian attacks show that control of the strategic waterway remains contested.

Oman has traditionally provided the most discreet and trusted channel, while Qatar, Pakistan and Turkey have used their relations with both sides to facilitate contacts or transmit messages.

Yet the continuing deadlock in negotiations has now encouraged Washington to widen the diplomatic circle.

In recent days, Austria and Greece have separately opened contacts with Tehran after consultations with US Secretary of State Marco Rubio, according to media reports.

The unexpected involvement of Austria and Greece suggests that European diplomacy, long marginalized in the Iran-US relationship, may be making a cautious return in the context of a regional military escalation.

The sequence of recent contacts is striking. US Secretary of State Marco Rubio met Austrian Foreign Minister Beate Meinl-Reisinger in Washington on August 11 and spoke by telephone with Greek Foreign Minister George Gerapetritis the following day. On August 13, both European ministers held separate conversations with Iranian Foreign Minister Abbas Araghchi. Although the US State Department denied asking them to transmit messages, the timing was probably not coincidental. The State Department subsequently confirmed that Iran had been discussed, while Austria formally offered Vienna as a venue for potential future talks. Greece emphasized freedom of navigation and maritime security in its exchanges with Tehran.

This is not yet formal mediation. Neither Austria nor Greece has the experience, access or accumulated trust that Oman possesses. Their involvement should instead be understood as an exploratory attempt to identify additional channels at a moment when traditional diplomacy is struggling. The proliferation of intermediaries itself is revealing: it demonstrates not the vitality of the diplomatic process, but its fragmentation.

Austria’s possible role is rooted in diplomatic history. Vienna hosted negotiations that culminated in the July 14, 2015 nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA). It is also home to the International Atomic Energy Agency, which would likely play a central role in verifying any future settlement concerning Iranian nuclear activities. Austria can therefore offer more than a neutral meeting room. It provides an institutional environment closely associated with nuclear diplomacy, technical verification and the memory of an agreement that once appeared capable of containing the Iranian nuclear crisis.

Vienna nevertheless carries contradictory symbolism. For Iranian officials, it recalls the JCPOA’s acceptance of limited Iranian enrichment for civilian purposes and the partial lifting of sanctions. But it also evokes the subsequent collapse of the agreement after the first Trump administration withdrew from it in 2018. Austria cannot repair that breach of confidence on its own. Its principal advantage is therefore procedural rather than political: it can provide a discreet and credible setting in which the United States, Iran and the IAEA might clarify their positions.

Greece brings a different form of leverage. As one of the world’s leading maritime nations, it has direct interests in the security of the Strait of Hormuz and the Red Sea. The disruption of navigation through Hormuz is not an abstract geopolitical problem for Athens. It affects Greek-owned shipping, insurance costs, energy prices and the stability of international trade. Greece can consequently address Iran not only as a European Union member and US ally, but also as the representative of an industry directly exposed to the consequences of escalation.

This maritime dimension may make Athens useful in discussions focused on practical arrangements rather than an immediate comprehensive agreement. Measures guaranteeing freedom of navigation, reducing threats against commercial vessels or creating communication mechanisms to prevent incidents at sea could be easier to negotiate than the most divisive nuclear and security questions. Greece could contribute technical knowledge and political advocacy to such discussions, although it lacks the capacity to provide Iran with the sanctions relief or security guarantees Tehran ultimately seeks.

The emergence of Austria and Greece also exposes the decline of the traditional European powers in the Iranian diplomatic arena. France, Germany and the United Kingdom were central to the nuclear negotiations that began in the early 2000s. Since then, however, the credibility of the European trio has deteriorated in Tehran and the three countries are facing bilateral diplomatic crises in their relations with Tehran. Iranian leaders accuse them of failing to protect the economic benefits of the nuclear agreement after the American withdrawal and of increasingly aligning themselves with Washington’s coercive approach. The mutual distrust generated by sanctions, mutual accusations of security “infiltration” and spying, regional conflict and disputes over Iran’s nuclear activities has left little space for the earlier model of European mediation.

This marginalization is being reinforced by the widening security confrontation. The Financial Times reported Wednesday that Iran had considered attacking US military targets in Europe, including in Bulgaria and Cyprus, if Washington further escalated the war.

Reuters reported Wednesday that a NATO official said the alliance was prepared to address any threat and take necessary action to defend its members. The official cited four occasions earlier this year when NATO air defenses intercepted Iranian ballistic missiles heading toward Turkey, saying they demonstrated the strength and effectiveness of NATO’s deterrence and defense posture.

Smaller European countries may therefore benefit from carrying less political baggage. Austria is associated more closely with dialogue than with strategic pressure and maintained substantial economic and energy ties with the Islamic Republic throughout the 1990s and 2000s. Greece, for its part, has generally remained outside the most confrontational debates over Iran. Yet their relative neutrality should not be overstated. Both countries are members of the European Union and close partners of the United States. Tehran will ultimately judge their usefulness by their ability to secure concrete concessions from Washington, not by the cordiality of their diplomatic rhetoric.

Their involvement also reflects the widening international cost of the conflict. The restriction of traffic through Hormuz, a corridor through which roughly one-fifth of global oil consumption normally passes, has transformed the crisis from a bilateral confrontation into a global economic emergency. Washington wants the strait reopened, while Tehran sees control over navigation as one of its most powerful remaining sources of leverage. Austria and Greece are entering the process because the consequences of failure now extend far beyond the Middle East.

The immediate objective should therefore be modest. Vienna and Athens are unlikely to replace Muscat, Doha or Islamabad, and multiplying intermediaries can produce contradictory messages and allow both Iran and the United States to avoid making difficult decisions. Their most useful contribution would be to support a coordinated diplomatic framework: Austria concentrating on nuclear verification and the venue for talks, Greece on maritime security, and traditional regional mediators on political communication and guarantees. Ultimately, no mediator can compensate for a lack of political will to pursue a diplomatic solution rather than military escalation. Austria and Greece cannot make that choice on behalf of Washington and Tehran, but they may help create the conditions in which diplomacy becomes possible.

Their return is therefore neither a diplomatic breakthrough nor an irrelevant gesture. It reflects an increasingly marginalized Europe urgently seeking new ways around a dangerous impasse. If carefully coordinated, these unlikely European channels could help prepare the ground for renewed negotiations. Otherwise, they risk becoming yet another improvised attempt to contain a conflict that its principal actors have so far proved unable to resolve. Europe nevertheless has a strong interest in assuming a more active diplomatic role: European states are already bearing many of the conflict’s economic and security consequences, yet they possess neither the political leverage to shape a settlement nor the military capacity – and, in most cases, the willingness – to impose one.

“I went to three gas stations to fill up and all three were closed,” one Tehran resident told Iran International on Wednesday. “One of them had put up a banner saying, ‘We have no gasoline.’”

Another resident said: “Today I spent about an hour in line for gasoline. Many gas stations had no fuel.”

Another Tehran resident said the Interior Ministry had ordered traffic police to crack down on older cars and motorcycles and impound them.

“They have said these vehicles should remain in impound lots for a month so that fuel consumption can be reduced this way,” the resident said.

The accounts come as Iran faces mounting pressure on fuel supplies, with domestic production struggling to keep pace with demand as a US naval blockade on Iranian maritime traffic disrupts fuel imports that previously helped cover the country’s domestic shortfall.

Esmail Saqab Esfahani, head of Iran’s Energy Efficiency Organization, said Saturday that the country faced a daily gasoline shortfall of around 14 million to 15 million liters.

Hossein Samsami, a member of parliament’s Economic Committee, warned Monday that raising gasoline prices amid current economic pressures could trigger widespread unrest, likening it to “a spark in a powder keg.”

Iranian officials have grown increasingly concerned about the prospect of renewed protests, while seeking to cast public discontent as being fueled by foreign adversaries.

Parliament Speaker Mohammad-Bagher Ghalibaf said Tuesday that the enemy was seeking “riots, assassinations and separatist activities” and intended to “exploit” any potential dissatisfaction over gasoline.

Concerns over methanol-blended gasoline

Plans to blend methanol into gasoline have also raised concern among Iranians, with locals telling Iran International they were uneasy about the fuel’s safety and its potential impact on vehicles and public health.

The concerns come against a backdrop of longstanding questions over fuel quality in Iran and previous reports that authorities used non-standard chemical compounds to help offset gasoline shortages.

Vahid Ghanei-Fard, CEO of the Persian Gulf Star Refinery, Iran’s largest gasoline producer, said Tuesday that a pilot project to produce methanol-based gasoline had been successful, with methanol accounting for 3% of the blend.

He said the fuel met “national and international standards” and that the use of methanol had helped raise the refinery’s daily gasoline output to around 49 million liters.

Saadatollah Molavi, an Iran-based refinery expert and frequent energy commentator, told IMNA, an Isfahan municipality-affiliated news agency, that methanol could play a role in easing Iran’s fuel shortage.

But Molavi warned against treating it as a long-term solution without assessing costs, efficiency, gas consumption and infrastructure needs, suggesting the blend may offer only a temporary fix rather than a sustainable answer to Iran’s fuel deficit.

Last May, the London-based independent research group Iran Open Data reported in May 2025, citing a confidential Oil Ministry document, that authorities had used hazardous and contaminated chemical compounds outside the conventional refining process to increase gasoline supplies.

The report described the practice as widespread and systematic and said it was aimed at compensating for the country’s gasoline shortfall.

Concerns over the quality of Iran’s gasoline are longstanding. In January 2023, Dariush Golalizadeh, an official with the Department of Environment, said only 38% of gasoline produced in the country met Euro 4 and Euro 5 standards.

President Donald Trump said he did not expect Iran to agree to the kind of deal he considered necessary and again made preventing Tehran from obtaining a nuclear weapon the central US demand.

“They’re not going to make the kind of a deal that I feel is necessary,” Trump said Monday. “Iran cannot have a nuclear weapon. And they won’t have a nuclear weapon.”

Asked whether Washington wanted to extend the interim agreement, Trump replied: “No.”

He also said the United States had “total control” over the Strait of Hormuz through its naval blockade.

Tehran disputes 60-day deadline

Foreign Ministry spokesperson Esmaeil Baghaei disputed the characterization of Monday as the expiry of the memorandum itself, although the text of the agreement says the two sides committed to achieving a final deal within a maximum of 60 days, extendable by mutual consent.

Baghaei insisted that the 60-day period linked to the Islamabad memorandum had been intended for negotiations and was no longer relevant because Washington had breached the agreement.

He said the memorandum contained no formal 60-day deadline and that Iran would not make decisions in response to ultimatums.

Foreign Minister Abbas Araghchi had said Friday that the memorandum referred to an “end to the war,” rather than a 60-day ceasefire requiring an extension.

Iran gives US ‘a few weeks’

A senior Iranian official told Reuters that Iran had set a period of “a few weeks” for Washington to fully implement the memorandum before further negotiations could take place.

“Within the short period of a few weeks set by Iran, all the agreement’s provisions must be implemented by the US. This is a precondition for further negotiations with the US,” the official said.

Reuters reported, citing the official, that Iran had adopted a “fully offensive” posture and would be prepared to escalate in the Strait of Hormuz and across the region if diplomacy failed.

The official said Tehran’s timeframe would be conveyed to Washington and regional governments through mediators.

Contacts continue without agreement

Trump also confirmed that his administration had established a direct backchannel with the Revolutionary Guards and said he was “not in a hurry” to end the war. The IRGC later denied that talks with US officials were under way.

Trump envoy Jared Kushner said later Monday that US conversations with different parts of the Iranian government were probably “more robust than ever,” but that the two sides had yet to reach an understanding.

Oil prices also rose Monday as investors grew more pessimistic about efforts to end the Iran war and shipping through the Strait of Hormuz remained constrained.

WTI settled 2.5% higher at $84.50 a barrel, while Brent rose 2.7% to $90.87, the Wall Street Journal reported. Gains accelerated after Iranian state media reported that an Emirati oil tanker had been seized in the strait.