Iran’s financial isolation deepens as banks struggle under sanctions

The escalation of the 2026 conflict has fundamentally altered the Central Bank of Iran's (CBI) operational reality, turning it from a traditional monetary authority into an instrument of wartime economic survival. As the US and the European Union systematically dismantle Iran's access to the global financial system, the domestic regulatory framework has fractured. This has created a severe disconnect between the CBI's mandates, the survival of domestic financial services, and the daily economic reality of Iranian citizens, who bear the ultimate brunt of comprehensive financial isolation.At the core of the current regulatory crisis is the aggressive expansion of the US and EU sanctions architecture, which has effectively severed the CBI and Iranian commercial banks from international correspondent banking.Historically, the CBI managed domestic liquidity and foreign exchange (FX) stability through access to overseas reserves and the SWIFT messaging network.