Donald Trump is banking on the economic crisis in Iran to achieve what American firepower could not.

The US President told this week that the US was “low-keying” the military assault. Iran’s economy is in a “very bad shape”, he said, adding that he was “watching Iran” as inflation rose and living standards dropped.

The comments indicated a shift in strategy: from the June memorandum of understanding (MOU) that promised phased sanctions relief and a $300bn (£222bn) reconstruction or investment fund, back to the economic pressure campaign Trump unleashed in 2018 when he unilaterally withdrew from the Obama-era nuclear deal and reimposed sanctions.

Trump’s strategy appears to be to wait and see whether economic hardship exacerbated by the losses inflicted during the war triggers an uprising, forces a change of government or at least compels Tehran to accept an American deal and make major concessions.

And some (especially Iran hawks) believe the President could be on the right track. If economic pressure is sustained, protesters could return to the streets and Iran could be forced to make a deal.

“We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money,” Trump said on Sunday.

The protests in December were at least partly a result of economic pain that had been building for years. Eventually, the dam broke.

But Trump has been widely blamed for plunging the world into a new crisis with his attack on Iran in February with Israel’s support, without consulting any of the US’s other regional allies or heeding advisers. As the EU foreign policy chief Kaja Kallas pointed out at a press conference, the Strait of Hormuz was open before the war. The President’s approval ratings have been tanking over the conflict.

The crisis is now about who will blink first as both the US and Iran seek maximum gains, a former senior diplomat from one of the Asian countries that purchased a large chunk of energy from the Gulf via the strait told The i Paper. He said Iran’s efforts to charge vessels using the strait could lead to other waterways being weaponised – and that the international community cannot accept blackmail.

Eric Lob of Carnegie Endowment described the situation to the Associated Press last month as a “test of wills” to see how much economic pain the Iranian Government is willing to absorb and how much political liability it creates for the US administration ahead of November’s midterm elections.

Iran is seeking sanctions relief before reopening the Strait of Hormuz and wants to use the disruption to global energy supplies as leverage against Washington.

But Richard Goldberg, a senior adviser at the Foundation for Defence of Democracies (FDD), a conservative think-tank, said in a June briefing that lifting sanctions on Iran now would amount to “front-loading” the relief “that’s driving” Iran to do a deal in the first place.

He has advocated for building and funding alternative oil routes and removing Iran’s ability to exploit the Hormuz waterway. “The sooner we work with the Gulf to build pipelines in every possible direction without relying on the Strait of Hormuz, the sooner that happens, you will have taken this final extortion card off the table,” said Goldberg, who served in the first Trump administration advising on anti-Iran policies.

The global economy’s absorption of much of the shock is deployed as proof that the US has more time than Iran and needn’t rush to finalise a deal. No deal is better than a bad deal, conservative think-tankers have said.

Last month, International Monetary Fund (IMF) economists said that the oil market had largely coped by withdrawing from inventories, increasing production elsewhere and because Gulf countries redirected exports through other pipelines.

The United Arab Emirates enhanced exports via the al-Fujairah pipeline, which bypasses the Strait of Hormuz and Saudi Arabia through the east-west pipeline to Yanbu on the Red Sea coast. Both are further expanding alternatives to reduce dependence on the strait.

“There are three key energy suppliers – if supplies are drying up from the strait, they can still be procured from Russia and Venezuela, and even the US,” said the senior Asian diplomat, implying Washington can afford to bargain a little longer.

Potential for uprising

However, that argument becomes considerably more controversial when it moves from economic pressure to actively arming Iranians.

In his June briefing, Goldberg suggested that the US and Israel should, if they aren’t already, arm Iranian protesters. “If we haven’t had a covert campaign already with the Israelis since the start of this to arm people and organise people, that’s malpractice. I hope that already exists and is ongoing, and has expanded now with the internet up,” he said.

Iranians are not new to economic crises but an uprising “was probable” sooner or later, a British-Iranian told The i Paper, based on his conversations with relatives and friends in Tehran. “Iranians are currently looking above their heads, for drones and fighter jets dropping bombs. They will only have the mind-space to question the Government about rising prices and the economic chaos once the bombs stop,” he said, although he noted that some retirees were already holding small-scale protests against the economic conditions.

According to the Iranian Government’s estimates, the war inflicted costs of up to $270bn (£200bn) in the first 40 days alone. The rial fell to a record low of approximately 1.9 million per US dollar by late April and by June, consumer prices were up by nearly 90 per cent from last year. The prices of bread and meat have jumped by 140 per cent, while industrial output of more than 20,000 factories has been destroyed or damaged.

Iran’s economic plight didn’t start with the war but even the Government has admitted that it is a key factor in deciding the outcome of the conflict. Iran’s President, Masoud Pezeshkian, has acknowledged economic pressures and warned against “widening public dissatisfaction”. He said that the US had failed to win the war militarily but that the “economy and people’s livelihoods are the most important front” in the conflict.

Pezeshkian has backed diplomatic means to resolve the conflict with the US but experts suggested Iranian hardliners are calling the shots and could push to expand the use of the “shadow fleet” – already utilised to evade sanctions – to ease economic pressure. Iran has been using ships that turn off transponders and can’t be tracked, which sell oil mid-sea – ship to ship.

Despite calls from Western hawks to stay firm against Iran and only offer sanctions relief as part of a broader settlement, there are concerns. Energy supplies have been costlier for EU countries, as the shortage led to a surge in prices. Asian nations who depended on the strait more than their European counterparts paid a higher bill. Gas remains harder to replace than oil. Qatar is one of the biggest gas exporters and has no alternative route.

Additionally, thousands were killed in government crackdowns during the pre-war protests, which may deter Iranians from returning to the streets. It remains possible once the bombs stop and Iranians take stock of their lives and ability to earn, but uprisings are usually lit by a spark. Their timing cannot be predetermined and, in Iran’s case, probably won’t come before the US midterms.

The Iranian Government is banking on Trump’s impatient and fickle nature – the question is how long it can hold out.