The United States and Saudi Arabia carried out their first publicly announced joint airstrikes against Iranian militia positions inside Iraq on Tuesday morning, killing at least 20 fighters from Kataib Hezbollah and Harakat al Nujaba near Basra, Al Qaim, and Mosul. The operation followed more than 30 drone attacks on U.S. forces and Saudi energy infrastructure over the previous 72 hours and came just hours after Iran fired ballistic missiles at a U.S. Central Command facility in Jordan, all of which were intercepted before impact.
Saudi Arabia putting its name on combat operations against Iran’s proxy network changes the pressure on the Islamic regime in a way that another round of American strikes alone would not. For decades, the Islamic regime built militia networks across Iraq, Syria, Lebanon, and Yemen specifically to avoid facing a broad regional coalition willing to use force openly. That buffer is thinner than it has been in years. The coalition enforcing the blockade and degrading Iran’s proxies is no longer solely American. It is expanding, and it is operating on Iraqi soil.
The airstrikes and missile exchanges dominated the news cycle. The blockade is inflicting the deeper wound.
Iran entered the war with a collapsing economy
Iran’s economy was deteriorating long before the first bomb dropped on February 28. Per capita income had fallen from roughly $8,000 in 2012 to about $5,000 by 2024. The rial halved between July 2024 and March 2025 and breached 1.45 million to the dollar on New Year’s Eve. Food inflation climbed above 70% during 2025. The government began distributing food coupons in January. Oil workers, truckers, merchants, and students protested across 17 of Iran’s 31 provinces, groups that had never aligned before in the history of the Islamic Republic.
When the war started, the Islamic regime briefly benefited. It closed the Strait of Hormuz while continuing to export its own crude, pushing oil above $90 and at times beyond $100 a barrel as competing supplies disappeared from the market. The International Energy Agency described it as the largest supply disruption in the history of global oil markets.
On April 13 the U.S. imposed the naval blockade, and the equation changed. More than 90% of Iran’s trade flows through the Strait of Hormuz. Daily crude exports fell to around 500,000 barrels. Oil revenue losses reached nearly $6 billion. The “Economic Fury” sanctions campaign added more than 1,000 designations targeting shadow banking networks, oil smuggling routes, and Hezbollah gold financing, creating the most intensive sanctions campaign ever directed at the Islamic regime.
The industrial base is gutted
The International Monetary Fund projects Iran’s economy will contract 6.1% in 2026 while inflation reaches 68.9%, the highest level since the 1979 revolution. The rial now trades around 1.89 million to the U.S. dollar. Capital flight reached $27 billion during 2025, roughly 7% of the country’s economy, while foreign direct investment totaled just $1.676 billion.
Automobile manufacturing has collapsed 47%. Washing machine production is down 42%. Television manufacturing dropped 36%. Petrochemical output shrank 17%. At the Iran Economy Outlook 2026 conference on July 20, economist Vahid Shaqaqi Shahri warned the country was caught between chronic inflation and hyperinflation. Iranian media also reported senior officials telling President Masoud Pezeshkian that rebuilding the economy could require more than a decade.
On July 12, retirees and citizens protested in temperatures above 50 degrees Celsius, chanting, “Warmongering is enough, our tables are empty.” Even with global oil trading near $89 a barrel, the Islamic regime cannot capitalize. Sanctions, insurance restrictions, transport limits, financial transfer blocks, and mandatory discounts to the few remaining buyers have severed the regime from a market that should be generating windfall revenue.
The target was the blockade itself
Iranian officials tied to the IRGC Aerospace Force have repeatedly described maritime enforcement as an existential threat to the regime. The missile strike sought to raise the cost of maintaining the naval operation. Every interception consumes expensive air defense interceptors. Every attack forces additional force protection measures. Every escalation requires more intelligence assets, naval patrols, and coordination with regional partners. The Islamic regime is betting those costs will eventually outweigh the political will to sustain the campaign.
The first publicly announced U.S. and Saudi strikes against Iranian proxies point in the opposite direction. Rather than narrowing, the coalition enforcing pressure on the Islamic regime is expanding. Saudi Arabia has now publicly accepted the political and military costs of participating in operations against Iran’s proxy network inside Iraq.
President Trump showed little sign that the campaign was nearing an end. Speaking to Fox News today after Iran’s missile attack, he said the U.S. would “beat the f**ing sht out of them” and “hit them hard.” He also said the overnight strikes against Iran aligned militias in Iraq had been coordinated with Baghdad. Asked about future negotiations with Iran, Trump replied, “We’re going to let them keep talking.”
Iran’s militias have already demonstrated they are willing to strike Saudi energy infrastructure and U.S. positions across the region. Whether that pressure intensifies is no longer the central question. The more important variable is whether the coalition continues accepting the costs required to keep the blockade in place as the economic pressure on the Islamic regime continues to build.