Iran's Economy Struggles Amid Sanctions and Ongoing Conflict
Six months into the war with the United States and Israel, Iran faces soaring inflation, rising unemployment and shortages as sanctions and a naval blockade curb oil exports.
Iranian households are feeling the impact of a deepening economic crisis, with prices for staples such as rice and beef rising sharply and wages halved compared with a year ago. Unemployment is reported at 9.1%, though independent observers suggest the real rate is much higher, and a Labor Ministry official said more than one million jobs have been lost since the conflict began.
The war, which started in late February, has intensified sanctions and a naval blockade that limit Iran's ability to export oil, its main source of revenue. The International Monetary Fund projects inflation near 70% by year-end and a contraction of the economy of over 5%. While gasoline remains subsidized, officials warn that domestic production is now lower than consumption and price hikes may be imminent.
Iranians describe cutting back on food, protein and leisure to make ends meet. One taxi driver, Ahmad Karimi, said he works 15-hour days and has given up fruit and protein to survive. A mother from northern Iran told reporters that her shopping basket has become smaller and that the emotional strain of denying children basic items is “exhausting.”
Experts note that Iran has adapted to sanctions by expanding domestic production, using informal trade networks and a shadow fleet to move oil. Hadi Kahalzadeh, a Brandeis University economist, said Iran’s “resistance capacity not only avoids collapse, it also prevents the economic pain from translating into the political pressure the U.S. expects.”
The United States has pledged tougher secondary sanctions, and the United Arab Emirates announced a suspension of trade with Tehran. Iranian officials, including President Masoud Pezeshkian, say they prefer a negotiated end to the war to protect livelihoods, while hard-line elements within the Revolutionary Guard continue to push for greater concessions, such as control over the Strait of Hormuz.
The government has eased enforcement of mandatory hijab rules, a concession that may reflect concern over public discontent, but many citizens remain focused on the deteriorating economic conditions.