Iran Prepares for a Zero-Oil Budget as US Blockade Threatens Its Economy

 Iran Prepares for a Zero-Oil Budget as US Blockade Threatens Its Economy

Iran is preparing for a possible future in which its government receives little or no income from oil exports, as a continuing US naval blockade and economic sanctions put increasing pressure on the country's finances.

The warning highlights the challenges facing President Masoud Pezeshkian's administration as it attempts to maintain government services, support households and control inflation during a prolonged economic confrontation with Washington.

Oil remains one of Iran's most important sources of government revenue. A prolonged interruption to exports could therefore affect public spending, salaries, pensions, imports and the country's ability to stabilise its currency.

Although Tehran has not confirmed that oil income has already fallen to zero, officials have acknowledged that the government must prepare for such a possibility.

Iran Considers a Budget Without Oil Revenue

Iran's government is examining different economic scenarios while preparing its budget for the next Persian calendar year.

A directive issued on November 3 outlined two possible situations: one in which sanctions and restrictions continue, and another in which economic and commercial conditions improve.

Mohammad Ghasemi, a senior official at Iran's Plan and Budget Organization, said the government must be ready for circumstances in which oil revenue reaches zero.

The statement reflects growing concern about the country's ability to depend on oil exports while access to international markets and shipping routes remains restricted.

Oil was expected to account for approximately one-third of the government's planned revenue in its 2026–27 budget proposal, making the sector particularly important to public finances.

If exports remain severely restricted, the government may have to rely more heavily on taxes, borrowing and other sources of income to finance its operations.

How the US Blockade Is Affecting Iran's Oil Industry

The US naval blockade has become a major part of Washington's economic pressure campaign against Tehran.

The first blockade began on April 13, 2026, targeting maritime traffic connected to Iranian ports. Restrictions were temporarily eased following an agreement in June, but the arrangement later collapsed.

Washington resumed the blockade on July 14 as tensions between the two countries continued.

The US military has said it redirected 147 ships and disabled five vessels during enforcement operations. It has also claimed to have destroyed 10 Iranian oil tankers associated with networks linked to the Islamic Revolutionary Guard Corps.

These figures are claims made by the US military and should be understood as such.

According to information cited in recent reporting by Al Jazeera, Iran had not loaded oil onto vessels since August 25, while energy analytics company Kpler reported a significant decline in Iranian production.

A Reuters investigation published in September also described how the blockade had disrupted Iranian crude exports, leaving the country struggling to deliver oil to its remaining major customers.

The restrictions are particularly significant because China has been one of Iran's most important oil buyers.

Without reliable access to shipping, insurance and international financial services, even oil that has already been produced can become difficult to sell and deliver.

Oil Production and Export Restrictions Create Additional Pressure

Iran's oil industry entered the current crisis with substantial production capacity.

Figures cited by Al Jazeera indicate that Iran produced approximately 3.45 million barrels of crude oil per day in January 2026 and around 3.59 million barrels per day in February.

However, a late-October assessment by Kpler suggested that production had fallen below two million barrels per day during the preceding months.

The difference between production and exports is important. Producing oil does not automatically generate government revenue if the country cannot transport, sell and receive payment for it.

Iran has also accumulated oil in storage, including cargoes held on vessels. But prolonged restrictions could make it increasingly difficult to move these supplies to international buyers.

Kpler's reported assessment suggested that oil stored outside the restricted area had declined significantly, while substantial quantities remained stranded within the blockade zone.

If these conditions continue, Iran could face a growing shortage of foreign currency at a time when its government needs money to pay for imports and public services.

Inflation Could Make Daily Life More Difficult

Iran was already experiencing serious economic difficulties before the latest restrictions.

High inflation, a weakening currency, limited investment and reduced purchasing power have placed pressure on households for years.

The situation could become more difficult if the government loses a significant portion of its oil income.

According to figures from Iran's Statistical Center cited by Al Jazeera, year-on-year inflation reached nearly 89 percent in the Iranian calendar month ending October 22, 2026.

Such high inflation can make essential goods increasingly expensive, particularly for families whose wages do not rise at the same speed as prices.

Food, transport, housing, medicine and other everyday expenses could become harder to afford if the economic situation deteriorates further.

A shortage of foreign currency could also make imported goods more expensive, adding another source of pressure on consumers and businesses.

Can Taxes Replace Iran's Oil Revenue?

Iran's government has increasingly turned to tax collection as an alternative source of public income.

However, replacing oil revenue through taxation alone could prove difficult.

Businesses and households are already dealing with rising costs, and increasing taxes too aggressively could weaken economic activity and place further pressure on ordinary citizens.

Economist and market analyst Isaac Saidian told Al Jazeera that the government could consider several measures to reduce financial pressure.

These include reviewing unnecessary administrative spending, reducing overlapping government programmes and postponing public investment projects that offer limited economic benefits.

Other possible measures include closing tax loopholes, improving tax collection, carefully issuing government bonds and selling selected non-essential state assets.

However, these options have limitations.

Reducing public spending too sharply could affect government workers, pensioners and households that depend on financial support.

The challenge for Tehran is to reduce its budget deficit without creating additional hardship for people already struggling with inflation.

Government Considers Support for Vulnerable Families

Iranian government spokesperson Fatemeh Mohajerani has said the next budget will focus on controlling inflation, supporting households and improving oversight of the banking sector.

The administration also intends to continue providing electronic food coupons to help families purchase essential products.

Such programmes can provide some relief, particularly for lower-income households.

However, the value of financial assistance can decline quickly when prices continue to rise.

The government may therefore face difficult decisions over how much support it can afford and which groups should receive priority.

Another possible measure involves gradually reducing fuel and other energy subsidies.

Although subsidy reforms could reduce government expenditure, they could also increase household and business costs if introduced without adequate protection for vulnerable consumers.

Can Non-Oil Trade Help Iran Survive?

Iran may also attempt to expand exports outside the oil industry.

Trade with neighbouring countries, agricultural exports, manufacturing and other non-oil sectors could provide additional sources of foreign currency.

However, these alternatives are unlikely to replace oil revenue immediately.

International sanctions can make it difficult for Iranian businesses to access banking services, insurance, shipping networks and foreign investment.

Even when neighbouring countries are willing to trade with Iran, financial restrictions can complicate payments and transportation.

This means that expanding non-oil trade could help reduce economic pressure, but it may not be enough to protect government finances if the oil blockade continues for an extended period.

What a Prolonged Blockade Could Mean for Iran

A prolonged reduction in oil income could affect more than the government's annual budget.

It could weaken public investment, reduce the government's ability to support essential services and increase pressure on the country's financial system.

The consequences could also extend to employment and private businesses if companies face higher import costs and reduced access to international markets.

For ordinary Iranians, the most immediate concerns could include rising prices, declining purchasing power and uncertainty about government assistance.

There is also a wider risk that prolonged economic difficulties could weaken the middle class and make it harder for businesses to invest and create jobs.

Nevertheless, the scale of the impact will depend on how long the restrictions continue, how effectively Iran manages its finances and whether diplomatic negotiations produce an easing of tensions.

Can Iran Survive Without Oil Revenue?

Iran has several possible ways to manage a major decline in oil income, including higher tax collection, spending reforms, non-oil exports and closer trade relationships with neighbouring countries.

But none of these options offers an easy or immediate replacement for the foreign currency generated by oil exports.

The government's ability to protect public services and household incomes will depend on how carefully it manages its limited resources.

For Washington, the blockade is part of a broader effort to increase economic pressure on Tehran. For Iran, the challenge is to prevent that pressure from developing into a deeper financial and social crisis.

Ultimately, the question is not simply whether the Iranian government can prepare a budget without oil revenue. It is whether the country can manage such a difficult period without placing an overwhelming burden on ordinary citizens.

Lamielsidenews.com.ng will continue to follow developments involving Iran's economy, US sanctions, oil exports and the impact of the restrictions on international energy markets.

Sources and Further Reading

1. Al Jazeera: "Can Tehran survive a 'zero oil' budget, if US blockade on Iran persists?" (https://www.aljazeera.com/economy/2026/11/11/can-tehran-survive-a-zero-oil-budget-if-us-blockade-on-iran-persists)

2. Reuters: "Blockade succeeds where sanctions failed as Iran oil exports stall" (https://www.investing.com/news/commodities-news/blockade-succeeds-where-sanctions-failed-as-iran-oil-exports-stall-4884076)

3. Reuters: "Iran oil tankers turned back by US blockade, Hormuz traffic sparse" (https://www.reuters.com/world/middle-east/shipping-traffic-through-hormuz-remains-muted-with-no-us-iran-deal-sight-data-2026-04-27/)

4. Radio Farda: "Iranian budget official says government must prepare for zero oil revenue" (https://www.radiofarda.com/a/iranian-budget-official-we-must-prepare-to-draft-budget-assuming-zero-oil-revenue/33893769.html)

5. Congressional Research Service: "The Strait of Hormuz: Security Developments and Impacts on Oil, Gas, and Other Commodities" (https://www.everycrsreport.com/reports/R45281.html)

This article uses publicly reported information and economic assessments. Figures and claims attributed to governments, analysts and media organisations are identified accordingly. Economic outcomes remain uncertain and may change as events develop.