TEHRAN, Iran (AP) — While Iran’s control of the Strait of Hormuz continues to disrupt global energy markets and cause worldwide economic strain, the nation’s domestic financial crisis is putting severe pressure on its ability to endure ongoing conflict and resist pressure from Washington.
Citizens across Iran are grappling with skyrocketing costs for essential items including food and medical supplies. The nation has simultaneously experienced widespread unemployment and business failures due to strike-related damage to crucial industries and extended government-imposed internet blackouts.
The financial impact of ongoing hostilities and America’s maritime blockade “has been very substantial and unprecedented for Iran,” according to Hadi Kahalzadeh, an Iranian economist and research fellow at Brandeis University.
However, Iran has endured multiple decades of financial pressure and sanctions, and its ability to adjust remains intact, Kahalzadeh noted.
“Iran can probably avoid a complete economic collapse or total shortage of essential goods, but at a very high cost,” he explained. “The main cost will be passed to ordinary Iranians through higher inflation, more poverty, weaker services and a much harder daily life.”
The International Monetary Fund forecasts Iran’s economy will contract by approximately 6 percentage points over the coming year. Government statistics released in mid-April showed yearly inflation reached 53.7%, while food price inflation exceeded 115% compared to the previous year’s figures.
Iran’s rial has simultaneously plummeted, losing more than half its worth over the past twelve months and hitting a historic low of 1.9 million per dollar at the end of last month. These economic hardships contributed to widespread demonstrations that swept the nation in January.
Sitting under an overpass in downtown Tehran, 56-year-old Hossein Farmani waited with fellow taxi drivers for potential passengers. Opening his car’s trunk to retrieve a kettle for tea, he contemplated the dramatic price surges over recent months. Tea prices, like milk and other staples, have increased more than 50% since hostilities began.
“If things keep heading in this direction, we’re going to suffer a lot more,” Farmani said.
While costs had been climbing gradually over two years, an Associated Press survey of Tehran grocery stores revealed dramatic increases since February, before the conflict started: poultry and lamb prices rose 45%, rice climbed 31%, and eggs jumped 60%.
Government officials have announced assistance programs to help citizens cope with crushing expenses. However, many policies — including a 60% minimum wage increase and voucher systems for basic goods — are actually fueling inflation, according to Taymur Rahmani, a University of Tehran economist, writing in the prominent business publication Dunya-ye Eqtesad.
Free public transportation introduced since the conflict began has also hurt the capital’s already struggling taxi operators.
Mohammad Deljoo, a 73-year-old driver waiting nearby, explained he supports his two children on just $4 daily income. While store shelves remain stocked, he attributes problems to “price gouging.”
“We only buy what’s absolutely necessary, things like bread and potatoes. Even eggs have become too expensive for us,” Deljoo said. Vehicle tire and parts costs have increased fivefold within a year.
“One price today, another tomorrow. How is that possible?” he questioned.
Facing widespread layoffs, many citizens are desperately seeking alternative income sources. Ali Asghar Nahardani, 32, said his ride-sharing company hasn’t paid him in over a month, forcing him into street vending to cover basic expenses.
“We’re just living day by day, trying to get through this situation while the war conditions continue,” he explained.
The strait’s closure has driven up global energy costs. Within Iran, however, the conflict represents another blow to a once-thriving middle class already devastated by decades of sanctions.
By 2019, Iran’s middle class had already contracted to approximately 55% of the population, according to Mohammad Farzanegan, a Middle Eastern economics professor at the University of Marburg. Additional sanctions, conflicts, corruption, and poor economic management have further reduced that figure, he said.
The current conflict will likely force millions more Iranians into poverty, based on a United Nations development agency report from late March.
A fitness instructor living in central Tehran characterized the economic emergency as a mental health crisis affecting Iranian society. Many clients can no longer afford her services, and remaining customers increasingly discuss managing depression symptoms.
“The system is just collapsing. The layoffs are in factories, in companies, in startups, in whatever your work is,” she said via Telegram voice message, requesting anonymity due to safety concerns.
The trainer has dramatically reduced grocery purchases.
“The last time I bought meat was about two months ago.” She’s also discontinued therapy sessions started after her divorce last year. “I am pursuing a master’s in psychology so it’s given me the tools to handle my anxieties,” she said.
A Karaj resident near the capital reported his insurance company experiencing plummeting vehicle and property policy sales. Families are sliding into poverty, he said, also speaking anonymously fearing retaliation.
The Karaj resident, who participated in January’s anti-government demonstrations, attributed the prolonged decline to “severe systemic corruption” and the Islamic Republic’s expensive backing of militant organizations in Lebanon, Yemen and Iraq.
“Most people blame the government and its ambitions,” he wrote via WhatsApp.
Iranian leadership has attempted to maintain domestic support by expressing sympathy while encouraging citizens to endure economic hardship for the war’s sake.
In Friday messages on his official Telegram channel, new supreme leader Mojtaba Khamenei called the current conflict phase an “economic battlefield” and urged employers to “avoid layoffs as much as possible.” Khamenei, believed injured early in the war by Israeli attacks, has not appeared publicly since.
Parliament speaker Mohammad Bagher Qalibaf — who has become a central figure in both war efforts and U.S. negotiations — encouraged Iranians to “be frugal” with spending. He stated on his official Telegram account that government officials and citizens “have a duty to help each other” to minimize economic impacts.
America’s blockade has severely limited Iran’s vital Gulf commerce. More than 90% of Iranian trade, especially oil exports generating billions in revenue, moves through southern ports, Farzanegan estimated.
Farmani, the taxi driver, said he opposes accepting what he called a “humiliating” peace with America and Israel.
“A country that has sacrificed so many martyrs and has so many people willing to give their lives cannot simply let others from across the world dictate terms to us.”
