Iran's economy contracts sharply as inflation nears 90% and job losses rise
Iran faces a deepening recession with inflation at 89.8% and up to 1.4 million workers potentially exiting the labor market by year-end, according to officials.
Iran's economy is projected to shrink further, with officials warning that up to 1.4 million people could leave the labor market by the end of the Iranian calendar year if the current downturn continues. Deputy for entrepreneurship and employment Seyed Malek Hosseini of the Cooperatives, Labor and Social Welfare Ministry told the Iranian Labor News Agency that official data show 700,000 jobs were lost during the recent conflict, while unofficial estimates suggest the figure may be closer to two million.
Hosseini noted that an internet blackout of nearly three months, which began during January protests, disrupted online platforms essential for many businesses. He added that even if all 700,000 officially recorded jobless individuals applied for unemployment benefits, the monthly payment of 16-17 million tomans would not cover basic living costs amid soaring prices.
The Statistical Center of Iran reported that year-on-year inflation reached 89.8% in September 2026, and the consumer price index rose 4.2% from August, pushing living costs to critical levels. Jalal Hashemi, chairman of the Iran Air Retirees Association, said two retired Iran Air employees had died because they could no longer afford medical treatment.
Hosseini highlighted that 54% of the labor market operates in the informal sector, where workers lack employment protections and insurance. He said each percentage-point decline in economic growth historically corresponds to a loss of about 170,000 jobs.
U.S. Treasury Secretary Scott Bessent told Iran International that he expects the Iranian economy to contract an additional 25% by next March and advised civilians to stock up on gasoline. Iran’s first vice-president Mohammad Reza Aref and Parliament Speaker Mohammad Bagher Ghalibaf have also urged citizens to reduce consumption of subsidized gas and natural gas ahead of winter.
Caretaker oil minister Hamid Bovard discussed joint oil and gas projects with Russian President Vladimir Putin, with reports indicating a gas trade deal is near completion and Russian involvement in developing four major Iranian oil fields.
The combined impact of renewed U.S. sanctions, high inflation, and repeated conflicts has strained businesses, leading many to scale down operations or exit the market entirely.