An Iranian vendor sits near a portrait of Iran’s late supreme leader Ayatollah Ali Khamenei at his fruit stall in the Shahid Boroujerdi residential complex in southern Tehran, Iran, on April 14, 2026.
Morteza Nicoubzal | Nurfoto | getty images
The war in the Middle East is pushing Iran’s already fragile economy toward collapse.
Tehran’s primary war strategy has been economic damage. Iranian attacks have targeted its neighbors’ energy infrastructure and imposed a blockade on the vital Strait of Hormuz, through which about 20% of the world’s oil and gas was shipped before the war, causing the worst energy blow in decades.
But its own economic situation is uncertain.
Even before the conflict, Iran was under pressure due to sanctions. inflation Exceeds 50% in 2025. Its currency, the riyal, lost 60% of its value in the months following the 12-day war against the US last July.
Food inflation rose to 64% by October last year and 105% by February, with bread and cereals rising by 140% and oils and fats by 219% by March 2026.
Iranian banks began distributing 10 million rial bills last month, highest denomination note Throughout its history, authorities tried to control inflation and meet demand for hard cash.
In its World Economic Outlook, the International Monetary Fund projected that the Iranian economy would 6.1% decline in 2026With 68.9% inflation. Its currency has fallen to about 1.32 million riyals per US dollar.
There are challenges in analyzing how Iran’s economy is faring amid the war. The country has not published GDP data since 2024, and widespread internet blackouts have made domestic figures inaccessible outside the country.
pushed to the brink
Effective closure of the Strait of Hormuz and The subsequent US blockade has cut off most of Iran’s international trade, including oil exports.
More than 90% of its annual trade passes through the strait. Jason Tuve, deputy chief emerging markets economist at Oxford Economics, wrote in an article that new tensions amid the US blockade could cut Iran’s export revenues by 70%. note of 15 april.
Tuve said the war has also caused a decline in domestic demand and imports, and while official data is scarce, March trade data from trading partners shows exports to Iran have declined.
The Trump administration has also Threat of new sanctions looms On Chinese banks facilitating transactions involving Iran.
Sentinel-2 satellite imagery processed and enhanced by Maps4Media shows a sweeping view of the Strait of Hormuz between southern Iran and Oman’s Musandam Peninsula, including surrounding islands, coastal areas and areas of turquoise shallow water at the entrance to the Persian Gulf.
Maps4Media | Getty Images News | getty images
The combined pressure of the blockade and the threat of sanctions on Chinese banks that support Iranian oil trade could deal a more severe blow to Iran’s economy than many anticipated, said Robin Brooks, a senior fellow at the Brookings Institution, a Washington-based think tank.
“It cuts off one of Tehran’s main lifelines, and brings up the point when Iran’s balance of payments hits the wall,” Brooks said.
“The effectiveness of this blockade and the fear it creates in Iran will (likely) bring Tehran back to the negotiating table in good faith,” Brooks said.
endurance test
Iran sees the Strait of Hormuz as key to its economic revival, and anyone in Washington hoping that Iran would give up the benefit of controlling it as part of a peace deal will be disappointed, Jasmine El-Gamal, founder and CEO of Avarice Strategies, told CNBC’s “Europe Early Edition” in March.
He said Tehran “holds it so dearly… because they know it is their key, their gateway to economic revival.”
Amir Handjani, senior non-resident fellow at the Atlantic Council, said that, despite severe inflation and contraction in growth, Iran may not face complete economic collapse.
He said Iran has been accustomed to dealing with heavy international sanctions for nearly five decades and has an energy transaction system that bypasses US sanctions.
“As long as a peace deal is reached with the United States that lifts sanctions and takes Iran’s economy out of the ‘penalty box’ it has been in for four decades, it could recover faster than many people expect,” Handjani told CNBC.
This photo taken on April 20, 2026 shows the Iranian national flag hanging over a building damaged by US-Israeli strikes in Tehran, Iran.
Shadati | Xinhua News Agency getty images
‘More than a decade’ to reform Iran’s economy
Senior Iranian economic officials reportedly recently warned President Massoud Pezeshkian that it could be delayed over a decade to rebuild the war-ravaged economy, according to Iranian local media, citing sources familiar with internal deliberations.
Central bank governor Abdolnasser Hemmati has also reportedly urged Pezeshkian to take immediate steps to stabilize the economy, including restoring full internet access and concluding a peace deal with the US.
Analysts say the main question is how quickly Tehran can repair the damage to the energy and industrial infrastructure that underpins its export revenues and employs much of its population.
Waves of intensified US-Israeli attacks have wreaked havoc on Iran’s energy infrastructure, deepening economic pressure in an effort to extract concessions from Tehran at the negotiating table.
“Attacks on oil refineries, power plants and related facilities represent the most serious economic wound of this conflict,” Handjani said.
According to Seth Krumrich, a retired U.S. Army colonel and vice president of security firm Global Guardian, Iran was already running a budget deficit before the war, and has suffered an estimated $200 billion to $270 billion in infrastructure damage.
“With no economy, failing basic social services, no alternative political or government options and no global friends to save them, and a catastrophic summer approaching, Iran is creating a serious humanitarian disaster,” Krumrich told CNBC.
Travelers walk past a large billboard depicting Iran’s Supreme Leader Ayatollah Mojtaba Khamenei on a street in Tehran on April 20, 2026.
flour edge AFP | getty images
Lucilla Bonilla, chief emerging markets economist at Oxford Economics, agreed that more difficulties are ahead for Iran.
Iran’s neighbors, isolated by attacks on their infrastructure, are already looking for alternative routes to cross the Strait of Hormuz, he said, while its remaining trading partners such as Russia and China have shown little willingness to come to its defense.
“We don’t know whether the war will continue, whether we’ll make a deal or not, but what we do know is that they (Iran) have a weak currency, inflation is very high. They will have a very large fiscal deficit, and then with this situation of re-routing to avoid (the Strait of Hormuz) they will have less leverage than they thought,” he told CNBC on Tuesday.
Even in a very optimistic scenario regarding a peace agreement, the outlook “is only of prolonged weakness and hardships for the people rather than improvement,” he said.
