Recession, 77% inflation, the port blockade and millions of citizens on the brink of poverty: how Tehran continues to withstand the greatest economic pressure in recent decades, writes Bloomberg.
Iran's economy was already under pressure before the US and Israel decided to declare war on the Islamic Republic. It was facing recession, runaway inflation and a currency crisis. We would have expected the economy to be completely crushed as a result of the middle of the war and the naval blockade.
However, as Bloomberg points out, it has not yet reached the point of collapse, as Donald Trump expected.
The crisis began before the war
Daily life for Iranians had become increasingly difficult long before the American and Israeli attacks. The prices of basic goods had skyrocketed, making it increasingly difficult to buy meat, eggs, rice and other essentials. Many households were forced to change their eating habits, replacing meat with cheaper products.
The main reason was the dramatic decline in export earnings and foreign exchange inflows after the reimposition of US sanctions during Donald Trump's first presidency. The dollar deficit has led to the collapse of the rial and a sharp increase in the cost of imports.
The economy contracted by 1.5% in 2025, while the government faced a massive social backlash when the new depreciation of the national currency sparked a wave of protests.
American and Israeli bombing caused damage to homes, hospitals, schools, energy facilities, refineries, fuel depots, and steel mills.
According to Tehran, the first six weeks of operations caused economic losses of around $270 billion – an amount approaching the country's entire GDP.
Thousands of businesses closed, many permanently, and economic activity virtually stagnated for weeks. The International Monetary Fund predicts the economy will contract another 6.1% in 2026, the deepest recession in decades.
At the same time, inflation rose to 77% and the rial fell to new historic lows. The lack of liquidity has led more and more households to purchase even basic services or everyday products in installments.
A million jobs lost
The human cost of the economic crisis is becoming more and more visible. Iranian media estimate that at least one million jobs have been lost since the war began.
Claims for unemployment benefits continue to rise, while the United Nations Development Program warns that another 4.1 million people could fall below the international poverty line.
In other words, nearly one in twenty Iranians are at risk of extreme economic hardship because of the conflict.
The blow to the blockade of the Strait of Hormuz
Perhaps the greatest economic threat to Iran comes from the sea. Since mid-April, the US Navy has imposed a blockade on ships bound for or departing from Iranian ports in the Persian Gulf, pressuring Tehran to reopen the Strait of Hormuz.
This development has severely limited exports of oil, petrochemicals and steel, depriving the country of valuable foreign exchange earnings.
Crude oil output fell to a five-year low in May, while available foreign exchange reserves are only enough for a few months of imports.
At the same time, import restrictions have created shortages of raw materials and basic goods, affecting everything from food to manufacturing.
The Internet became another victim
Adding to the problems was a widespread government-imposed blackout of internet access. For about three months, most citizens only had access to state-controlled platforms and internal services. Business groups estimate the restrictions have cost the economy between $30 million and $40 million a day.
Although access was largely restored at the end of May, many restrictions remain in place.
Why didn't the economy crash?
The question that concerns analysts and markets is why the economy is still working. The answer lies despite the “resilience economy” that Iran has built over decades. The country has learned to function under sanctions, trade embargoes and international isolation. This is something that Trump has obviously not considered.
It has developed complex networks of front companies to process transactions, uses hidden fleets of oil tankers to export oil, and has accumulated significant experience in circumventing Western restrictions.
In addition, before the war, it was able to significantly increase oil exports and benefit from rising international prices, creating an economic “cushion” that continues to provide respite.
At the same time, the government has banned exports of many basic products, prioritizing the domestic market, while increasingly turning to alternative trade routes through Pakistan, Afghanistan, Russia and China.
Even if a peace agreement is reached, reconstruction will take years and enormous resources
Tehran is demanding reparations for the devastation caused by the war and the lifting of sanctions so that it can more easily reintegrate into the international economy. However, there is no guarantee that these requests will be accepted.
The question that matters is ultimately about social resilience. Economic pressure increases the risk of further protests, but for now the regime appears to be in control. The scale of the bombings fueled anti-Western sentiment in the country, temporarily easing pressure on the government.
Iran today is in a delicate balance: strong enough to avoid collapse, but wounded enough to know that each additional month of war will make recovery more difficult and costly.
