The Real Test for Iran Comes After the War

The Islamic Republic has not collapsed in the way US President Donald Trump may have anticipated. Iran has instead shown agility and discipline in executing a phased escalatory response: first retaliating against targets across the Gulf, then widening the battlefield into the economic and energy sphere through the effective closure of the Strait of Hormuz. The next step may be to use the Houthis in Yemen as a lever in the Red Sea and Bab al-Mandeb. But taking the steps many expected Iran to take under acute pressure is not the same as proving regime endurance.

The post-war picture in Iran is likely to be shaped not only by military losses or retained offensive capabilities, but by something less visible in the short term. This includes the scale of damage to economic infrastructure, the burden on industrial recovery, and the future of Iran’s access to the regional financial and commercial environment that has helped it absorb pressure until now. If relations with the Gulf harden further, those constraints may become sharper still. The economic consequences of the war, whether debilitating or, under a negotiated settlement, partly reversible, may prove more consequential than the military phase itself.

Iran’s IRGC and the Political Economy of Regime Preservation

The current conventional assessment assume that Iran’s post-war trajectory will inevitably be one of further hardening: that the Islamic Republic, under stress, will retreat more deeply into the ideological instincts that have defined the post-1979 order under Khomeini-Khamenei supreme rule. There is some basis for that view. The regime has demonstrated an ability to adapt tactically while preserving its core character. But this reading is also incomplete. It risks treating a political outcome as predetermined, leaving too little room for the possibility that pressures from below, including from Iranian opposition voices and a war-weary public, could still shape the direction of events. It also overlooks the possibility that hardening may generate not only endurance, but brittleness: a post-war system that appears more entrenched yet is less capable of absorbing internal shocks without fracturing.

Importantly, it underestimates the regime’s survival instinct borne out of the complex, labyrinthine economic incentives that bind the regime elite together. At the centre of that system is the Islamic Revolutionary Guard Corps (IRGC), whose influence extends well beyond the military sphere into construction, energy, logistics, telecommunications, smuggling networks and sanctions-era commerce. For parts of the elite, preserving the regime is not simply about defending an ideological project but rather about protecting access to wealth, patronage and commercial privilege. That does not mean internal fracture is impossible. On the contrary, the point is that the drivers of elite cohesion are more complex, and more deeply embedded, than ideological loyalty alone, and the post-war environment may throw open new axes of competition and rivalry across different centres of power in the Iranian system.

Restoring Relations with the Gulf Cooperation Council

One of Tehran’s most immediate post-war constraints will be the need to repair relations with the Gulf states. The Gulf monarchies have been directly exposed to Iranian ballistic missile and drone attacks, and the scale of the disruption to critical infrastructure has been significant. Qatar’s LNG sector, in particular, may face a prolonged recovery period. The 2023 China-brokered rapprochement did not insulate Saudi Arabia from the consequences of this war, while the UAE has borne some of the most serious costs of Tehran’s retaliation.

Iran will need to rehabilitate relations because it will need a less hostile regional environment if it is to preserve access to the commercial and financial channels on which it has long relied. The foremost concern is not deteriorating trade volume between Iran and the GCC, but Tehran’s access to a permissive financial ecosystem in the Gulf that has reportedly cushioned the impact of sanctions.

Of key importance, however, is the financial environment – particularly centred in the UAE – that facilitated Iran’s financial lifelines despite sanctions. Prior to the war, the UAE was central to Iran’s trade. In the fiscal year ending in March 2024, Iran imported $20.8 billion worth of goods from the UAE, making Iran its leading source of imports, according to Iranian customs data. In the same period, the UAE was Iran’s third-largest export destination, accounting for $6.6 billion in Iranian exports.

That trade relationship has mattered not only in formal terms, but because front companies registered in key third-country jurisdictions such as Hong Kong or the UAE have been reportedly used by Iranian exchange houses to launder the revenue generated through the illicit sale of Iranian oil and other petroleum products. In late 2025, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) identified dozens of apparent Iranian front companies, including oil companies primarily based in the UAE and Singapore that had moved roughly $4 billion in transactions in 2024.

After the war, third-party states may become less willing to tolerate the grey-zone commercial activity that has helped Iran navigate sanctions. In practice, a less permissive Gulf posture could mean tougher due diligence on Iranian-linked entities, greater scrutiny of dual-use trade, stricter oversight in free zones, more caution around beneficial ownership and a reduced willingness to look the other way when sanctions evasion passes through regional jurisdictions.

The Gulf states are unlikely to resume business as usual without demanding credible assurances on their security. Any future accommodation with Tehran is likely to be more conditional, more transactional and more tightly tied to guarantees around non-aggression, maritime security and the protection of energy infrastructure.

The Post-War Burden of Economic Recovery

The US-Israel target set has extended into the infrastructure that supports Iran’s economic resilience, including the South Pars gas field and Asaluyeh processing hub, which are central to domestic gas supply; two of the country’s largest steel plants; and, according to Iran’s foreign minister, a power plant as well. Added to this are strikes on or near strategic nuclear infrastructure at Natanz, Arak and Bushehr. The cumulative effect is to make post-war recovery more difficult, more expensive and more politically fraught.

Unless the war ends with a diplomatic deal that includes substantial sanctions relief, Iran will emerge into a post-war environment still shaped by intense economic pressure. The regime has spent years building workarounds to ensure resilience of critical sectors through illicit petroleum sales, sanctions-evasion networks, and supply chains designed to absorb external shocks, but the economic strain ahead will be shaped by the war’s extensive damage and by Iran’s own exposure to the consequences of escalation.

A specific test of resilience will be water and basic infrastructure. Iran entered this war with recurrent electricity, gas and water shortages and an already severe water crisis; Tehran itself was warned last year of possible acute shortages. As the war continues, the burden of reconstruction will grow sharply.

Iran Can Still Threaten Hormuz, But It Is Not Cost-Free Brinkmanship

Tehran is not indifferent to the costs of taking Hormuz from managed disruption to full closure. Iran has weaponised the strait, but prolonged disruption drives up market volatility, threatens its own export position, and risks testing the patience of China, its main oil buyer, whose tolerance for a sustained shock to energy flows cannot be assumed. Any attempt to push the energy crisis further would therefore weigh directly on Iran’s recovery prospects, export earnings, and access to hard currency at a moment when all three will be central to the regime’s future.

The cost of post-war reconstruction is likely to be extremely high, even if the full scale of the damage cannot yet be quantified. Despite prevailing rhetoric of triumphalism from Tehran, Iran cannot realistically expect to rely indefinitely on a de facto ‘toll booth’ model in the Strait of Hormuz as a substitute for economic recovery. Other forms of relief will be needed. One possibility is negotiated, conditional sanctions easing. The current picture remains murky, with mixed signals from the White House suggesting that diplomacy is still in play even as uncertainty persists over whether President Trump has ruled out a ground operation. But if talks were to succeed, and Iran were prepared to make meaningful concessions on its nuclear programme, missile and drone production and IAEA verification then the economic gains from sanctions relief could be substantial.

For Washington, sanctions relief embedded in a negotiated settlement could help bring additional Iranian supply back into global energy markets, lower price volatility and ease inflationary pressure. Perhaps counterintuitively, there is also a longer-term leverage argument: bringing parts of Iran’s economy back into formal, regulated channels could give the US more – not less – visibility and conditional influence than a system defined by sanctions evasion and opacity.

The argument, however, has always run both ways and is by now a familiar one. Critics of sanctions relief have contended that it would strengthen the regime’s authoritarian apparatus. But there is also a countervailing pathway worth considering, particularly under current conditions of exceptional strain spurred by the war. Economic opening does not automatically produce democratisation. Yet bringing more of Iran’s economy into formal, regulated channels could weaken some of the opaque and sanctions-era structures that have disproportionately empowered security networks and grey-market intermediaries, chiefly in the IRGC and its sprawling and self-authorising patronage network.

In the short term, this war is likely to strengthen the IRGC’s hand inside Iran. As economic pressure mounts, regime loyalists and security gatekeepers will look to consolidate both power and profit, especially through the opaque networks that have sustained Iran under sanctions and assured these actors with self-preservation at the expense of a wider population under duress. But the scale of reconstruction required after damage to major energy and industrial infrastructure will be severe, and that will put pressure on the very patronage system that has helped hold the regime together. Over time, conditional re-entry into regulated economic channels could begin to weaken parts of the pre-war economy, creating different incentives for the elite and create opportunities for domestic political opposition. This is not a democratisation argument in any automatic sense but an argument about how shifts in Iran’s political economy can, over time, alter the balance of interests inside the system. Whether the US would have the patience to test that proposition is another question.

Whatever happens next, this much is true – a surviving Islamic Republic is likely to have with fewer favourable options than the language of endurance implies. It may survive the war, but with a more damaged economy, a steeper reconstruction burden and a less permissive regional environment in which to navigate both.

It would be a mistake to confuse Iran’s continued capacity for asymmetric escalation with a settled conclusion about regime endurance. That conclusion is premature.

© RUSI, 2026.

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