Iran's economy on the edge of a cliff because of war

The only collapsed infrastructure was the target of the attacks, causing the steel factory and plant to go out of place while the bridge and ports are useless.

Even worse than that, oil and gas facilities have been hit, while the current American blockade of Iranian ports has almost completely cut off Tehran's main source of income: money from oil.

Since the currency has dropped to historicly low levels against the dollar and internet cuts have paralysed businesses, analysts say Iran's economy is now located in an unknown territory.

So if the regime does not require concessions from the US to remove the blockade, the economy will remain extremely weak”, said Jason Tuvey, deputy economist for developing markets in the London-based Capital Economics.

But, in the end, everything depends on the level of economic pain the Iranian regime is willing to afford to achieve its military and geopolitical goals”, he added.

The situation has deteriorated so much that high officials can no longer deny the damage.

The governor of Iran's Central Bank, Abdolnaser Hemmmati, has reportedly asked President Masud Peschian to take urgent steps to stabilise the economy, including restoring full internet access and reaching a peace agreement with Washington.

Government spokeswoman Fatemeh Mojaerani has estimated that the total damage to infrastructure and to residential and commercial property from war totals 270 billion dollars. This figure is nine times higher than Iran's entire public budget for 2025 and approximately 60 percent of the country's economic output, according to the Economics Page Eghtesad News.

Iranian officials estimate that reconstruction costs will reach around $300 billion for civilian infrastructure alone, while other costs will come from other economic cuts, such as the loss of businesses and the need for social payment increases.

According to Gholamhossein Mohammad, Iran's deputy minister of labour, preliminary estimates show that the conflict has led to the loss of more than one million jobs and has left two million people unemployed directly or indirectly.

Wartime has made Iran's labour market even worse.

According to the Iranian economic daily Donya Eqtesad, spring is traditionally the peak employment season. Iran Talent's employment platform says that a typical spring month produces about 65,000 free jobs. This year, new jobs have dropped by 80 percent. For every five jobs opening last spring, four have now disappeared.

As for job demands, the figures are just as high. On May 5, the Jobvision employment platform recorded a daily record of 318,000 CV delivered by job seekers - 50 percent more than the previous record of 212,000 Sosh.

The gap between job seekers and open jobs has never been greater.

Meanwhile, analysts say the destruction of the economy has been exacerbated by the state-set internet cuts, now on its 66th day.

This disruption costs Iran's digital economy between $30m and $80m every day, destroying electronic trade, logistics and technology sector, not to mention small entrepreneurs whose businesses have completely stopped.

In a sign of growing concern, the Union of Production and Publishing of Material, which represents businesses operating in digital space, has called for safe internet access to Iranians.

In a carefully formulated statement on May 4th, the union said that, although supporting government decisions under emergency conditions, any policy in this area should be developed with private sector participation.

The life of millions of Iranians built on a digital basis should not become a toy of divisive political interests”, the statement said.

Iranian Ryal has dropped in parallel. The currency now trades around 1.9 million rials per single dollar on the free market, more than double its value a year ago, according to T JUU, a platform that tracks the gold market and currency exchange in Iran.

Since oil revenues have been halted by American naval blockades and businesses are unable to generate tax revenues, the government faces a structural funding crisis.

Speaking to REL Radio Farda, Dalga Khatinoglu, the Azerbaijan-based energy expert for Iran, said Iran would have to lower oil and gas production if the blockade continues, because it is running out of storage capacity.

He estimated that if the American blockade continues for another month, Iran's oil production will fall for 1.2 million barrels a day.

This will be very painful for Iran”, Khatinoglu said.

The fiscal consequences extend beyond the loss of production.

Iranian economist Majid Salim Boruille, writing on the Yahan-e-Sana economic daily, warned that any increase in oil revenues due to higher prices during the closure of the Hormuz Strait is temporary and that post-war reconstruction costs will far exceed it.

With lack of reliable sources of income, he argued that monetary financing of the deficit practically money printing may be the only remaining route, a road that risks accelerating inflation that has already exceeded 70 percent. / REL