For many Iranians, the impact of the ongoing war goes beyond military clashes, affecting daily life and finances. A housewife named Mina describes how her family’s diet has changed drastically as prices soar, illustrating the economic pressures facing many.
According to information released by the International Monetary Fund, Iran’s economy is expected to shrink by 5.4% this year, while inflation approaches 69%. The World Bank warns that the combination of conflict, reduced trade, and ongoing uncertainty is intensifying the country’s economic challenges.
Economic Crisis Intensified by Conflict
Economist Ahmad Alavi, based in Sweden, explains that Iran’s economic struggles predate the war but have worsened significantly since. Before the conflict escalated, Iran was already dealing with inflation exceeding 40%, a declining currency, budget deficits, and long-term sanctions.
The war has compounded these issues through infrastructure damage, trade disruptions—particularly through the Strait of Hormuz—internet shutdowns, and inflationary pressures. Official figures show annual inflation at 66%, with food prices rising even faster: bread and cereals up 140%, meat and poultry 135%, dairy products over 116%, and edible oils more than 200% higher.
Middle Class Facing Growing Financial Pressure
The rising cost of living has pushed an estimated 4 million Iranians into poverty, according to economists. Middle-income families, once financially secure, face increasing strain as costs surpass wages. Many salaried workers and pensioners have fallen below the poverty line for the first time due to income stagnation amid soaring inflation.
Households have cut back on non-essential expenses like travel and clothing, but prolonged inflation is forcing reductions in food quality, healthcare, and education. Alavi warns that if these trends continue, living standards will deteriorate further, with more families sacrificing basic needs and the risk of rising unemployment affecting the private sector.
Challenges for Businesses and Trade
Private businesses also struggle under economic uncertainty. Iran’s traditional trade routes have been disrupted, with some suppliers replaced by alternative routes through Central Asia, largely led by China. Despite these shifts, high inflation and currency collapse hinder market growth and create daily financial unpredictability for merchants.
Business owners express doubt about the future due to fluctuating exchange rates and diminishing consumer purchasing power, signaling broader economic instability beyond immediate physical damages caused by the war.
Government Response and Outlook
Although global oil prices have risen, sanctions and higher transport costs prevent Iran from fully benefiting through increased oil revenues. Government interventions such as subsidies and price controls may provide temporary relief, but experts agree they do not resolve fundamental economic problems.
Alavi emphasizes that restoring confidence among investors, businesses, and consumers is essential but likely to take longer than physical reconstruction. Without easing inflation, stabilizing currency, and improving trade conditions, many Iranians, including those in the middle class, will continue to face financial hardship even if military tensions decrease.
