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The war to break Iran’s economy

April 7, 2026
in Finance
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The war to break Iran’s economy
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As the clock ticked down on Donald Trump’s deadline for Iran to reopen the Strait of Hormuz or face strikes on its power plants and bridges, the US president warned that “a whole civilization will die tonight”.

“I don’t want that to happen, but it probably will,” he said on his Truth Social platform on Tuesday.

For Iranians, Trump’s belligerent comments will reinforce the fear that the US-Israeli war against the Islamic republic has moved beyond its nuclear programme and ballistic missile arsenal to become an onslaught on the economic fabric of their nation.

Over the past five weeks as Trump and Israeli Prime Minister Benjamin Netanyahu have stepped up their rhetoric against Iran’s leaders, the attacks on civilian infrastructure have intensified.

Air strikes have destroyed key pillars of Iran’s industrial production, vital transport links, leading research centres and the engines of its export sector.

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Now Trump is threatening to destroy “every bridge” and warning that “every power plant in Iran will be out of business, burning, exploding and never to be used again” if Tehran fails to allow shipping to move freely through the Strait of Hormuz. The deadline, which Trump has changed multiple times, is 8pm Eastern US time on Tuesday.

“If the US and Israel cannot force Iran to fully surrender, they will try to weaken it as much as possible, rendering it a failed state and irrelevant in international affairs,” said Saeed Laylaz, an Iranian analyst. “They aim to turn Iran into another Syria or Libya. So far, their actions have been painful but not decisive.”

Trump says he wants to pressure Iran into a deal as he threatens to bomb the republic back to the “stone ages”, while Netanyahu has openly touted his desire to use the war to destroy its industrial base and infrastructure to weaken the Islamic regime’s hold on power.

On Tuesday, Israel hit Iran’s railway network in at least two locations — hours after warning Iranians to stay away from trains and tracks.

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After Israel bombed some of Iran’s largest petrochemical plants on Monday, Netanyahu said “we are systematically dismantling the IRGC’s [Islamic Revolutionary Guard Corps] money machine”.

His defence minister Israel Katz said the Israeli military had been instructed to “attack with all force the national infrastructure of the Iranian terrorist regime”.

Vali Nasr, a former US official and professor at Johns Hopkins University, said the military campaign appeared designed to “impoverish Iran as a country and break the internal coherence that has allowed it to survive sanctions, to be able to wage war and sustain itself”.

Based on the view that ‘sanctions aren’t enough’, he said the objective appeared to be destroying “the industries, institutions that allowed Iran to survive sanctions to the extent it had”.

Thick black smoke rises from industrial buildings at the Mahshahr Petrochemical Zone, with Iranian flags in the foreground.
Israeli bombs hit petrochemical plants in the southern port city of Mahshahr over the weekend © Social Media/Reuters

Over the weekend, Israeli bombs hit petrochemical plants in the southern port city of Mahshahr. Local authorities said a plant that was struck also supplied electricity to other petrochemical plants and provided power to about 500,000 residents in the southern Khuzestan province, where summer temperatures regularly exceed 50°C.

Israel on Monday struck petrochemical facilities in Assaluyeh, home to Iran’s largest energy hub, causing all the plants in that complex to shut down. It had already damaged gas production facilities in South Pars, Iran’s key gasfield, last month.

Last week, Israeli air strikes forced Iran to shut down its two largest steel plants. One of Iran’s biggest pharmaceutical manufacturers, Tofigh Darou, which produced important cancer treatments, was also destroyed by air strikes last week, the health ministry said.

By striking at the heart of Iran’s industrial base, Israel has hit a vital source of non-oil export revenue for the Islamic republic. In the first 10 months of the last Iranian year, which ended in March, non-oil exports totalled $51.6bn, compared with total imports of $58.1bn, according to Iran’s customs administration.

Petrochemicals account for nearly half of Iran’s non-oil exports, followed by minerals and industrial goods such as steel. These are primarily shipped to China, Iraq, the United Arab Emirates, Turkey and Afghanistan.

Non-industrial sites are also increasingly being struck. On Monday, Iran accused Israel of striking Sharif University, the country’s most prestigious engineering institute. Last week, Israel bombed Tehran’s more than 100-year-old Pasteur Institute, one of its leading medical research facilities.

Severely damaged building at the Pasteur Institute of Iran, with debris scattered and fire visible inside the structure.
Last week, Israel bombed the Pasteur Institute, a renowned medical research facility in Tehran © @HKermanpour/X

Nasr said for many Iranians the attacks were evoking images of Iran’s devastation during the first world war.

“What’s happening is a war on social, political, industrial economic institutions that has taken a century for Iran to build,” he said. “People are taking it much more personally. These institutions predate the Islamic republic — Sharif University was the shah’s pride and joy.”

Iranian officials say some 30 universities have been damaged across the nation, as well as more than 700 schools and tens of thousands of residential buildings.

And last week, a day after he first threatened to send Iran back to the “stone ages”, Trump posted a video of the Islamic republic’s largest bridge collapsing in plumes of smoke following a hit by American air strikes.

The newly built B1 suspension bridge, which links Tehran to the western city of Karaj, was not yet fully operational.

Esfandyar Batmanghelidj, chief executive of the UK-based Bourse & Bazaar Foundation think-tank, said the damage to infrastructure and manufacturing facilities “would take years to rebuild”.

“Normally, a country would shift to imports until domestic manufacturing recovers. But Iran is under draconian sanctions that will undermine the recovery,” he said. “Not only will Iran struggle to import the machinery and equipment damaged during the war, but it will also struggle to import the finished goods it needs to make up for shortfalls in domestic output.”

Yet Iranian analysts say that rather than persuade the Islamic regime to capitulate to Trump’s demands, the attacks risk eliciting more retaliatory strikes against civilian infrastructure in the region.

A student walks through a damaged mosque interior with debris scattered on the floor and parts of the ceiling collapsed.
A mosque at Tehran’s Sharif University of Technology was struck by missiles, one of 30 universities across Iran that have been targeted, according to local authorities © Francisco Seco/AP

Iran’s military has warned of a “crushing” response if civilian infrastructure continues to be hit, with the Revolutionary Guards warning that if Iranian power plants are hit “the region will go dark”.

Iran has throughout the war responded to US and Israeli attacks by hitting energy facilities, desalination plants and aluminium factories in Gulf states, as well as a refinery in the Israeli port of Haifa and a chemical plant in southern Israel.

“This is an existential war and we have no other choice but to fight and win it,” a regime insider said.

As the destruction in the republic mounts, Tehran is insisting that sanctions relief and compensation be integral to any deal to end the war.

Iran’s foreign minister Abbas Araghchi said on Monday that the US and Israel had committed “vicious war crimes” by targeting infrastructure.

UN secretary-general António Guterres has also expressed alarm at Trump’s threats to bomb power plants, bridges and other civilian infrastructure, according to his spokesperson.

The US president has brushed off suggestions he would be committing war crimes by hitting power plants, saying members of the regime were “animals”.

A volunteer sweeps debris inside a damaged building, with destroyed structures and rescue workers visible outside.
A resident clears away debris following a US-Israeli air strike on residential buildings in Tehran © Majid Asgaripour/WANA/Reuters

There have already been multiple incidents of damage to the country’s power network, with Iran’s energy ministry saying about 2,000 “serious incidents” had affected the grid. In most cases the power has been restored within hours.

Officials have sought to reassure the public that strategic commodities have been stockpiled for months. They insist that a nationwide blackout is unlikely, citing the decentralised nature of the electricity network, which relies on several hundred power plants.

Yet any major disruption would paralyse daily life in the country of 90mn as the regime seeks to keep the economy running during the conflict and project control.

Pedram Soltani, a businessman, warned that the destruction of industries such as steel and petrochemicals would disproportionately affect lower-income groups, adding to the economic pressure on poorer Iranians.

“Tens of thousands of workers are directly working in these industries and hundreds of thousands of others work in affiliated downstream industries,” he wrote on X. “The working class will fall into maximum poverty.”

That would exacerbate the regime’s challenges of trying to manage years of rising social discontent once the war ends, in a weakened state and with far fewer resources to begin the arduous task of rebuilding.

“During the war, it’s politically stronger because it’s not confronting dissent in a country that is getting more and more angry at the US and Israel,” Nasr said. “In the longer run we have to see . . . Unless Iran finds a way to have steel, and petrochemicals and all these other things, its management of the country or ability to wage war will be compromised.”

Additional reporting by James Shotter in Jerusalem. Cartography by Steven Bernard and Alan Smith

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