Iran’s Economy Is In Shambles As War Takes Its Toll

Despite the bluster from Iranian officials on social media, it should come as no surprise that the country is not doing well economically. From the beginning of the conflict to current day, Iran has been dealt an estimated $270 billion to $300 billion in total damage due to a steady barrage of strikes, including numerous infrastructure targets from bridges, highways, railways, airports, etc. 

The three-month-long US blockade on Iran’s oil exports have also taken a toll, with national oil output dropping from 2.2 million bpd to less than 300,000 bpd.  It is likely that there has been some long term damage to the regime’s oil wells and they have lost approximately $6 billion in oil revenues so far.      

With a general information blackout in place, getting a proper estimation of the damages can be difficult.  However, in recent months many Iranian leaders and media sources have indicated a dangerous shift in the stability of the country.  The situation has become so volatile that citizens are reportedly turning to theft in order to get their hands on basic necessities including food.  

Iranian newspaper Jahan-e Sanat has reported increased theft of basic groceries over recent months, with store workers linking the trend to rising poverty. Related reports say meat is in short supply, there is reduced consumption of staples, subsidy shortfalls, and broader poverty pressures.

Analysts note that while full state collapse or famine has not yet occurred, the combination of high food inflation, currency weakness and job losses is placing severe strain on households.  Iran’s President, Masoud Pezeshkian, seemed to confirm the decline last week when he noted that the country was facing economic “difficulties and problems,” while claiming the enemy was trying to provoke protests.

At Iran’s 33rd Conference on Monetary and Banking Policies (around June 2026), he questioned why people wake up to find their purchasing power has fallen and stated there are “hundreds of ways to overcome the economic impasse.” He noted that policymakers take people’s money and “return it with reduced value.”

Central Bank Governor Abdolnaser Hemmati presented a recovery roadmap and acknowledged an ongoing GDP contraction. He stated that “the combination of war and cruel sanctions has posed serious challenges to the country’s economy. Most importantly, people’s livelihoods have been severely affected because various sectors of the economy have been impacted by sanctions.”

He also cited inflation at around 53%, which appears to be a underestimation of the real currency destruction taking place.

Government spokeswoman Fatemeh Mohajerani has discussed infrastructure damage (e.g., bridges, tunnels, gas and electricity capacity losses), adjustments to gasoline rations, and challenges with subsidy payments disrupted by banking issues or cyberattacks.  

These admissions are often wrapped in claims of resiliency despite the crisis, but the biggest danger (inflation) has yet to fully play out.  SCI data for the Persian month of Khordad (ending ~June 21, 2026) showed overall year-on-year inflation of 88.6% (up from pre-escalation levels around 50%). Food inflation reached 134%, with oils/fats  at 278%, red meat/poultry at 178%, and bread/cereals at nearly 139%.

The rial hit record lows of around 1.5–1.9 million per USD at various points during the war. This has amplified import costs and eroded purchasing power.   

Crippling infrastructure damage and currency devaluation might help to explain Iran’s desperate insistence on charging tolls in the Strait of Hormuz.  If their oil industry is facing a multi-year setback and damage to infrastructure is extensive, tolls on shipping through the strait may be their only source of economic recovery. 

Iranian citizens turning to theft to make ends meet is a far more profound issue than a similar trend would be in the US or Europe.  In Iran, punishment for a first offense for theft of food is three months to one year of incarceration and up to 74 lashes.  Multiple thefts can result in the amputation of fingers, life in prison or execution.  The point is, stealing is no small matter in Iran and for people to turn to theft suggests extreme economic derailment. 

Even if the war ends this week as negotiations reportedly carry forward, Iran faces a long and arduous road to recovery.  It is likely that a collapse of the existing system is inevitable.  Whether or not this actually leads to civil unrest as the regime fears is anyone’s guess.