Iran’s economy has suffered across industries in the weeks since the war with Israel escalated, with strikes and disruptions hitting factories, jobs and household prices. In interviews and commentary cited by The Associated Press, economic damage has spread from industrial plants to small businesses as trade flows slow, manufacturing capacity shrinks, and essentials become more expensive.
The report described manufacturing grinding to a near halt in places such as the industrial heartland of Iran’s carpet sector, while large steel mills that once drove a major share of economic output have gone silent. It said dairies struggled to find packaging for milk and butter, and that the damage is reverberating through the broader economy, threatening more layoffs as prices surge.
The economic blow combines direct strike damage with trade and logistics constraints. The report said the United States blockades Iranian ports, threatening to choke off many imports and oil exports that bring in billions of dollars, and it warned that economic hardship could again spark unrest like the protests that surged in January before being crushed. Iran, for its part, has leverage in the Strait of Hormuz, and the report said Iranian leaders say they will reopen the key waterway for global energy only if the blockade is lifted and the war ends.
Deputy Labor Minister Gholamhossein Mohammadi told Iranian state media that Iran has lost at least 1 million jobs directly because of the war, the report said. Hadi Kahalzadeh, an Iranian economist and research fellow at Brandeis University, warned that the ripple effects put about 10 million to 12 million jobs at risk—described as roughly half of Iran’s labor force.
Kahalzadeh also tied the crisis to large-scale damage to industrial capacity, saying airstrikes damaged 20,000 factories—some 20% of the country’s production units. The report said the strikes went beyond facilities Israel described as tied to the paramilitary Revolutionary Guard, reaching sites not owned by the force, including Tofigh Daru, Iran’s largest pharmaceutical holding, which produces anticancer drugs, as well as optics and chemical developers and aluminum and cement factories.
The report said Israel hit Iran’s biggest steelmaking and petrochemical factories, with many of the impacts concentrated in a wave of strikes just before an April 8 ceasefire. It reported that the two largest steel producers, Mobarakeh Steel and Khuzestan Steel, along with smaller mills, halted production, and that more than 50 petrochemical complexes were shut down, citing Iran’s semiofficial Jamaran news agency. The closures, the report said, have crippled Iran’s two biggest non-oil exports, contributing to price increases that have flowed into industries producing plastics, pipes, fabrics and even packaging for milk, butter and cheese.
Beyond factories, the report cited broader disruptions that have compounded the economic strain. It said the internet has largely been shut down since the protests, hurting small and medium-sized businesses reliant on online sales. It also said that even before the U.S. blockade, Iranian strikes on the United Arab Emirates—on which Iran relied for about a third of its imports—led the UAE to cut off trade.
In the carpetmaking city of Kashan, the report described manufacturers struggling to keep operating as exports fell and domestic sales nearly disappeared. It said that around 80% of rug and carpet manufacturers stopped operations in Kashan’s industrial zone, according to the son of a rugmaker, who spoke on condition of anonymity for his family’s security. “Never have I heard my father so upset,” the son said, and he added that his father still goes to the facility each day even as production has shut down.
Industrial downturns are also showing up in sectors tied to construction. Mehdi Bostanchi, who owns a ventilation and air conditioning factory and a second business producing household fans with more than 1,130 employees, said both still operate, but that HVAC production depends heavily on construction, which he described as facing “a massive shock.” The report said most new building is on hold and that the price of iron sheeting has more than doubled.
The report also described how the economic shock reaches employment even through private-sector contractor relationships. A chemical engineer at a major private construction contractor told AP that the firm laid off half of its 180 headquarters staff and shut down a project with Mobarakeh Steel, costing about 1,000 jobs. A Tehran resident who quit a job as a consulting engineer just before the war also said his new job is now uncertain and that his savings may run out in the coming weeks, speaking on condition of anonymity.
As the economic pressure builds, Iranian officials and experts are attempting to project resilience. The report said hundreds of thousands took to the streets in January’s protests amid worsening inflation, and it described government efforts to reassure the public that Iran can withstand the pain. The government has promised to increase unemployment insurance, though Kahalzadeh said the burden on Iran’s social security system is rising even as funding is “gouged,” because it depends heavily on stakes in petrochemical companies and other key industries.
The report said Iran’s exports have been threatened further by the blockade and that Iran sold about $98 billion in exports in 2025, just under half from oil, citing data described by Esfandyar Batmanghelidj, an economic expert. It also said a complete blockade is difficult, with about half of Iran’s non-oil trade moving overland or through Caspian Sea ports, according to Batmanghelidj.
Batmanghelidj wrote for the Bourse and Bazaar Foundation, a research group he heads on economic development in West and Central Asia, that Iran has built “readiness for worst-case scenarios.” The report said Iran has maintained large reserves of vital supplies, including enough electrical machinery for nearly eight months, cement for nearly six months, and enough steel and iron for four months, with rationing potentially stretching supplies further.
Bostanchi said he believes the economy could bounce back once the war ends, but he linked optimism to whether Iran can lift international sanctions. “If we cannot lift the sanctions in any agreements, then no, the optimistic forecast … will not happen,” he said.