Tehran rejects US terms as hardliners push escalation

In Mashhad, firebrand Friday prayer leader Ahmad Alamolhoda claimed that “US Army infantry is responsible for rising prices.” He later said the remark was metaphorical, arguing that the war had triggered hyperinflation and that “profiteers and the main culprits behind rising prices are the US army’s infantry.”

Earlier in the week, Hossein Shariatmadari, editor of the hardline daily Kayhan, wrote that “rising prices and hoarding are the products of the enemy’s infiltration in the government.”

While Iran’s armed forces were “working miracles,” he argued, the economy had been left undefended, allowing enemies to undermine battlefield gains.

Shariatmadari, who for decades attacked previous administrations over inflation and economic mismanagement, remained notably quiet during the ultraconservative governments of Mahmoud Ahmadinejad and Ebrahim Raisi.

In 2024, he claimed rising prices had “nothing to do with the performance of the government or parliament,” describing inflation as part of a foreign conspiracy.

Last week, he questioned why parliament had stopped monitoring the government’s performance. Days later, lawmakers held an online session with Agriculture Minister Gholamreza Nouri Ghezeljeh to discuss food prices, a move widely mocked in Iranian media as ineffective and detached from public hardship.

While Alamolhoda urged Iranians to embrace a vague “jihadist economy,” Shariatmadari called on officials to confront an unspecified “economic mafia.”

Moderate outlets, however, framed the crisis differently. The daily Arman Melli argued on Sunday that the latest surge in prices could not be explained solely by wartime conditions, pointing instead to years of structural economic problems, rising state expenditures and populist policymaking.

The paper also called for “effective use of diplomacy” to end the conflict while safeguarding national interests, arguing that renewed negotiations could help stabilize the economy.

The reformist website Rouydad24 described a society undergoing “economic and psychological erosion,” where inflation was no longer an abstract statistic but a daily reality.

Families were removing meat from their diets, patients cutting medication in half and tenants being pushed toward cheaper outskirts of major cities.

Economic newspapers described parliament’s online session as “a bitter confession” that authorities were losing control of the situation, reflected in shrinking household budgets, disappearing essentials and rising public anxiety.

Despite government claims of wage increases of up to 60 percent for workers, many public employees say they have not received the raises. Unemployment is rising, layoffs are spreading and businesses are shutting down, while temporary contracts leave many workers with little protection against dismissal.

Iranian media now report complaints about living costs even among government supporters attending nightly demonstrations. Families that once lived modest but stable lives increasingly struggle to afford housing, medical treatment, tuition and other basic necessities.

Many workers say they are still earning salaries set years ago in an economy where prices change almost daily, leaving much of Iran’s working and middle classes crushed by relentless inflation.

Foreign ministry spokesman Esmail Baghaei said Tehran’s proposal included ending the war in the region, lifting what he described as the US blockade, releasing frozen Iranian assets, ensuring safe passage through the Strait of Hormuz and restoring regional security.

“The Islamic Republic has proven that it is a responsible power in the region,” Baghaei said during his weekly briefing. “We are not bullies; we stand against bullies.”

He accused Washington of continuing to insist on “unreasonable” demands.

US President Donald Trump on Sunday dismissed Iran’s latest response to a US proposal as “totally unacceptable,” while Iranian state media said Tehran rejected what it described as Washington’s “excessive demands.”

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The dispute appears to center on two of the war’s most contentious issues: Iran’s insistence on sovereignty over the Strait of Hormuz and Washington’s demands over Tehran’s nuclear program, particularly its stockpile of enriched uranium and enrichment infrastructure.

Tehran says focus remains on ending war

Baghaei said Iran was not currently focused on decisions related to uranium enrichment or the future of its nuclear activities.

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  Netanyahu says Iran regime change ‘possible, not guaranteed’

“At the current stage, our focus is on ending the war,” he said. “Later, regarding the nuclear issue, Iran’s materials and matters related to enrichment, we will discuss those issues when the time comes.”

Several countries, particularly in the region, had contacted Tehran because of concerns over further escalation, he added.

“We have always appreciated parties that sincerely try to persuade the other sides to stop creating tensions,” Baghaei said.

Pakistan acting as ‘mediator’

Baghaei described Pakistan as an “official mediator” between Tehran and Washington and said other countries, including Qatar, were also maintaining contacts with both sides and sharing proposals with Iran’s foreign minister.

Baghaei also urged European countries not to be drawn into the conflict through what he described as pressure from the United States and Israel.

“We clearly told European countries not to allow temptations from the United States or Israel on regional issues to drag them into a crisis that will bring them no benefit,” he said.

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  Trump says Iranian people must have guns to fight

Many European governments, he added, understood the war had been “illegal, immoral and aggressive” and had resisted pressure to openly support actions he said “undermined international peace and security.”

“Is it possible? Yes. Is it guaranteed? No,” Netanyahu said in an interview with CBS’s 60 Minutes aired Sunday.

His remarks came as US President Donald Trump dismissed Iran’s latest response to a US proposal as “totally unacceptable,” while Iranian state media said Tehran rejected what it described as Washington’s “excessive demands.”

The dispute appears to center on two of the war’s most contentious issues: Iran’s insistence on sovereignty over the Strait of Hormuz and Washington’s demands over Tehran’s nuclear program, particularly its stockpile of enriched uranium and enrichment infrastructure.

Netanyahu acknowledged that Israeli planners only fully grasped the scale of the risk posed by Iran’s ability to disrupt shipping through the Strait of Hormuz after the war began.

“It took a while for them to understand how big that risk is, which they understand now,” he said.

The war between Israel, the United States and Iran began on February 28 and formally paused under a ceasefire framework brokered through Pakistani mediation, though negotiations over a broader settlement remain unresolved.

Iran’s throttling of traffic through the strait, through which roughly a fifth of global oil supply normally passes, has driven oil prices and US gasoline prices higher in recent weeks, complicating the political backdrop for Trump.

Netanyahu also said the conflict was “not over” as long as Iran retained highly enriched uranium and active enrichment facilities.

“There’s still nuclear material, enriched uranium, that has to be taken out of Iran,” Netanyahu said. “There are still enrichment sites that have to be dismantled.”

Asked how the uranium should be removed, Netanyahu replied: “You go in, and you take it out.”

Trump says Iran cannot be allowed to obtain a nuclear weapon, while Tehran insists its nuclear program is entirely peaceful and intended for civilian purposes.

The International Atomic Energy Agency has meanwhile repeatedly warned that Iran’s enrichment of uranium to 60% purity—one step from weapons-grade—has “no credible civilian justification.”

Netanyahu said a collapse of the Islamic Republic would likely mean “the end of Hezbollah, the end of Hamas” and probably the Houthis, arguing that Iran’s regional network depends heavily on Tehran’s leadership.

He also said he hoped Israel could eventually reduce its dependence on US military aid, describing it as the right time to begin rethinking the financial component of the US-Israel relationship.

Israel currently receives about $3.8 billion annually in US military assistance under a 10-year agreement signed in 2016.

In the latest episode of the Eye for Iran podcast, host Mohamad Machine-Chian sat down with two experts to dissect the fallout: Bozorgmehr Sharafedin, Head of Digital News Services at Iran International and former Reuters Energy Correspondent, and Dr. Iman Nasseri, Managing Director for the Middle East Research at FGE Nexant consultancy, in Dubai.

Together, they painted a picture of a region at a point where a "broken" waterway might be forcing the world to permanently look elsewhere.

Tehran’s unexpected leverage

For decades, the Islamic Republic used the threat of closing the Strait as a rhetorical deterrent. However, according to Bozorgmehr Sharafedin, the actual closure in early 2026 was as much a surprise to Tehran as it was to the world. Having seen their primary deterrents – missile programs and regional proxies like Hezbollah – fail to prevent direct conflict with the US and Israel, the establishment stumbled upon a different kind of power.

"Iranians are also surprised," Sharafedin noted. "The deterrence they didn’t count on that much – the closure of the Strait of Hormuz – became their most valuable card. Now, they are tying the future security of Iran to the management of Hormuz. We had the deputy speaker of the parliament saying that the Strait of Hormuz is our nuclear weapon."

This shift in doctrine has led to a dangerous sense of triumphalism in Tehran. State-controlled media has floated the idea of imposing "transit fees" or "security taxes" on ships, much like the Suez Canal.

But Sharafedin warns that this strategy is fatally short-sighted. Unlike the Suez, which is governed by an international treaty and relative predictability, the Islamic Republic’s logic defies stability. "They will try to impose their political views and preferences on this transit route," he explained. "Many shipping lines simply won't risk it."

The 'broken vase' of global energy

The economic consequences of this closure are already being felt, even if they aren't always visible in the "Brent Crude" price tag seen on news tickers. Dr. Iman Nasseri pointed out that while the public looks at futures prices, the physical market has been in agony.

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"The price of jet fuel was over $200 for a prolonged period," Nasseri revealed. "The market is furious and frustrated. We have 12 to 14 million barrels per day of unsupplied demand. In India, many people do not have gas for cooking. The demand destruction has already happened."

This disruption has permanently changed how global powers view the Persian Gulf. Sharafedin cited comments by International Energy Agency (IEA) chief Fatih Birol, saying: "The Strait of Hormuz is like a broken vase. It's broken. The damage is done. It's almost impossible to put it back together." The world is no longer waiting for the Strait to reopen; it is actively building a future without it.

The exodus to alternative routes

The most immediate reaction to the blockade has been a massive surge in investment toward alternative infrastructure. Pipelines that were once considered "economically unfeasible" are now receiving emergency funding. Sharafedin noted that since the start of the conflict in February, the volume of oil transferred via alternative routes has nearly doubled, jumping from 4.2 million to 7 million barrels per day.

"Iraq recently allocated $1.5 billion for a pipeline connecting Basra to Jordan, Syria, and Turkey," Sharafedin said. This diversification isn't limited to the Middle East. Buyers like Pakistan, which relied on Kuwaiti oil for 50 years, are now sourcing crude from Nigeria, Libya, and the United States. Even China, the region's biggest customer, is accelerating its trillion-dollar pivot toward nuclear and solar energy to escape its reliance on the Hormuz bottleneck.

Regional prosperity held hostage

While the global economy may eventually adjust by finding new suppliers, the outlook for the Middle East itself is much grimmer. For the last decade, countries like the UAE, Qatar, and Saudi Arabia have tied their future prosperity to a logic of stability and foreign investment. That dream is now under direct attack.

"The Islamic Republic is single-handedly holding the region down," Sharafedin argued. He pointed out that every time the region moves toward a better future – whether through the Arab Uprisings or attracting tech giants like Amazon AWS – Tehran intervenes to sabotage the stability required for such progress. By attacking infrastructure in Fujairah and targeting tankers in the Red Sea, the regime has signaled that no alternative route is safe.

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"I don't think many of those countries can now justify the investment of huge data centers," Sharafedin lamented. "Both short-term and long-term, the regional countries will pay a heavy price."

Scenarios for 2027: A prolonged limbo

As the US shifts from "Operation Epic Fury" to "Project Freedom," a new diplomatic phase is emerging, but Dr. Nasseri remains skeptical of a quick fix. He outlined a base-case scenario where the market sees only a "gradual recovery" to about 60% of pre-war levels by late 2026, with the situation remaining largely flat well into 2027.

The fundamental issue, Nasseri argues, is the massive gap between Washington and Tehran’s expectations. "The same regime that has not agreed to terms over the last couple of years will not suddenly do so now," he said. While a potential Memorandum of Understanding (MOU) might provide temporary "happy headlines" to calm traders, the structural reality remains one of severe disruption.

Hundreds of thousands of Iranians who built lives and businesses in the UAE now face visa cancellations, frozen finances and mounting uncertainty as relations between Tehran and Abu Dhabi deteriorate.

According to several affected residents, Iranian nationals who left the UAE during the recent conflict—whether for Iran or third countries—are no longer being allowed to return, even to collect their belongings. In some cases, families still inside the Emirates have reportedly been given only weeks to leave.

Many Iranian residents say they have also been instructed to transfer funds abroad and are increasingly unable to use UAE bank accounts.

While properties and businesses have not formally been confiscated, some owners can no longer manage them directly and must rely on proxies or powers of attorney to sell assets.

Foreign companies operating in the UAE are also becoming increasingly reluctant to deal with Iranian individuals or firms, particularly those connected to trade with Iran. Many export orders involving Iran have reportedly been canceled.

“No one knows what tomorrow will bring”

Reza, a 40-year-old Iranian who has lived in Dubai with his wife for more than eight years, said Iranians still inside the UAE have not yet been deported but remain under constant pressure.

“For now, our residency status in Dubai has not changed,” he said. “But my friends say Sharjah, Abu Dhabi and other emirates are cancelling visas even for Iranians who are still inside the country.”

Reza said he and his wife, a physician, have effectively lost their livelihoods despite retaining residency permits. His wife’s hospital declined to renew her contract, while his own import-export business has ground to a halt.

“My situation is very unclear,” he said. “No one knows what tomorrow will bring.”

He added that although his company’s licence has not officially been revoked, it can no longer function because trade involving Iran has effectively stopped.

“With work permits cancelled, people can no longer use their own assets,” he said. “A food wholesaler’s store has been shut down and, because he no longer has a business licence, he cannot even sell the goods sitting in his warehouse.”

According to Reza, the pressure is even greater on intermediaries accused of helping Iran circumvent sanctions by selling oil or moving funds abroad. He said many have already been expelled from the UAE and had their bank accounts frozen.

A critical trade relationship disrupted

For years, Dubai, particularly Jebel Ali port, served as one of Iran’s most important commercial gateways, handling a large share of Iranian imports and transit trade. The UAE was often Iran’s largest or second-largest trading partner after China.

That trade route now appears severely disrupted amid rising regional tensions and what Iranian media describe as a tightening maritime blockade.

The UAE said Friday it had intercepted new missile and drone attacks allegedly launched from Iran, adding that three residents were injured.

Earlier this week, Iran’s Khatam al-Anbiya Central Headquarters denied carrying out attacks on the UAE but warned that any operation launched from Emirati territory against Iranian islands, ports or coastlines would receive a “crushing and regret-inducing response.”

Iranian media have meanwhile intensified criticism of Abu Dhabi. Jam-e Jam newspaper described the alleged seizure of Iranian assets as “modern-day robbery and open hostility,” while Abolfazl Khaki of Iran’s Chamber of Commerce accused the UAE of showing “maximum hostility” toward Iranian traders during the recent conflict.

“The recent experience showed that the UAE is no longer a safe place for Iranian investors,” Khaki said.

Iranian officials are now openly discussing alternative trade hubs. Nadir Pourparcham of Iran’s Chamber of Commerce said trade ties with the UAE “will never return to the way they were” and pointed to Qatar’s Hamad Port as a possible replacement. Iranian media have also promoted Pakistan’s ports as alternative corridors for Iranian trade.

The conservative outlet Mashregh News argued that Iran no longer needed “unreliable intermediaries” such as the UAE and said closer ties with China and Pakistan could help Tehran withstand economic pressure.

“It is time for Dubai to understand that Iran’s geography is not for sale,” the outlet wrote.