Already weakened before the war, the Iranian economy sinks into crisis.

Iranian Economy Plunges into Chaos Amid War

In Iran, the anger over the economic situation fueled massive anti-government protests prior to the pre-war sanctions. After five weeks of conflict, the situation has worsened significantly.

Beyond the casualties and daily fear of attacks, the most immediate impact of the war has been a surge in prices across essential goods like food, medicine, and baby products, as well as at trendy cafes in the capital.

Amir, a 40-year-old Iranian from the outskirts of Tehran, shared with AFP that the price of his usual bread had skyrocketed from 700,000 to 1 million rials (around 0.75 dollars).

One of his friends had to pay 180 million rials for a cancer treatment tablet, which previously cost about three million, before the American-Israeli attacks on February 28th. “And he has to buy one every 20 days.”

Kaveh, an artist from the capital, revealed how the popular Dobar cafe in central Tehran “increased all its prices by 25% in a single day.”

Even in the well-supplied northwest region of the country, reliant on imports from neighboring Turkey, “some products are now three times their usual price,” shared a 50-year-old woman.

The central bank recently introduced a new ten million rial banknote, setting a new record compared to the previous five million note.

This rapid move highlights the sharp depreciation of the currency since the June 2025 war with the United States and Israel. This depreciation played a crucial role in the largest protests against the government in recent history, triggered by strikes from merchants in Tehran’s famous bazaar.

Thousands were killed in January during the subsequent crackdown, according to human rights groups. But following that, alongside inflation, a surge in unemployment has emerged. Many businesses closed due to the war, leaving employees uncertain and unpaid.

Throughout the country, bazaars reduced their opening hours, and the construction sector faced massive layoffs, affecting many Afghan migrants.

“When the war started, job opportunities became scarce, and people abandoned construction sites,” explained 23-year-old unemployed painter Faizullah Arab, returning to Afghanistan last weekend after a stay in Tehran.

“Employers left for abroad,” added his 42-year-old compatriot Walijan Akbari.

Those reliant on internet-based activities or running online businesses were also severely impacted by the digital blockade imposed by authorities.

“I’m genuinely very worried about our future, especially economically,” expressed a 35-year-old woman working in finance in Isfahan. “Massive layoffs, widespread closures… it’s shocking.”

Airstrikes targeting the steel industry and petrochemical facilities will have a lasting impact as well.

Adnan Mazarei, a former senior IMF official specializing in the Middle East, has also expressed concern about the financial sector. Although bank cards and online services have mostly been operational, limits were imposed on ATMs to prevent mass withdrawals.

Before the war broke out, the banking system was already vulnerable, and now faces new challenges with individuals and businesses struggling to repay their debts.

The most recent bankruptcy involved Ayandeh, one of the country’s largest private banks, which collapsed at the end of 2025, burdened by bad debts and losses totaling 5.2 billion dollars.

Mazarei believes more bailouts may be necessary, potentially leading to printing more money. However, this could fuel inflation once again, raising concerns in an economy already grappling with a 50.6% annual inflation rate as of mid-March, according to official statistics.