The closure of the Strait of Hormuz and strikes on key infrastructure have disrupted global energy supplies, but the economic toll is weighing heavily on ordinary Iranians. The U.S. naval blockade has restricted Iran’s critical Gulf trade routes. University of Marburg Professor of Middle Eastern economics Mohammad Farzanegan estimated that more than 90% of Iranian trade, particularly the oil exports that generate billions of dollars in revenue, normally flows through southern ports.
In Iran, the cost of basic staples has climbed sharply since the conflict escalated. An Associated Press tour of grocery stores in Tehran found that between February, before the current phase of fighting began, and May, prices for chicken and lamb rose 45%, rice jumped 31%, and eggs increased 60%. Tea prices, a household staple, have risen over 50% during the same period. “One price today, another tomorrow. How is that possible?” said Mohammad Deljoo, a 73-year-old taxi driver in Tehran who is supporting a family of two children on a daily income of $4. Deljoo added that the price for tires and other car parts rose fivefold in less than a year.
The currency’s collapse has fueled the price spikes. Hadi Kahalzadeh, an Iranian economist and research fellow at Brandeis University, said the economic cost of the war and the blockade “has been very substantial and unprecedented for Iran.” While the state has withstood decades of sanctions and retains the capacity to adapt, Kahalzadeh noted that the burden is shifting to the population. “Iran can probably avoid a complete economic collapse or total shortage of essential goods, but at a very high cost,” he said. “The main cost will be passed to ordinary Iranians through higher inflation, more poverty, weaker services and a much harder daily life.”
Efforts by the government to cushion the blow have paradoxically worsened the inflation. Measures such as a 60% hike in the minimum wage and coupon programs for essential goods are stoking price increases, Taymur Rahmani, an economist at the University of Tehran, wrote in the business newspaper Dunya-ye Eqtesad. Since the war began, free bus and metro fares in the capital have also negatively impacted struggling taxi drivers. Meanwhile, mass job losses and business closures are forcing many into the informal economy. Ali Asghar Nahardani, 32, said the ride-hailing app he works for had not paid him in over a month, prompting him to turn to street vending to cover expenses. “We’re just living day by day, trying to get through this situation while the war conditions continue,” he said.
The conflict is accelerating the collapse of Iran’s middle class, which had already contracted to roughly 55% of the population by 2019 due to sanctions, corruption, and economic mismanagement, Farzanegan explained. A late March report by the U.N.’s development agency warned that the war will likely push several million more Iranians below the poverty line. The economic distress helped fuel massive protests that spread across the country in January.
Political leaders are attempting to shore up the homefront. Supreme Leader Mojtaba Khamenei, who is believed to have been wounded early in the war by Israeli strikes and has not appeared in public, described the current phase of the conflict as an “economic battlefield” in messages on his official Telegram channel. He asked employers to “avoid layoffs as much as possible.” Parliament Speaker Mohammad Bagher Qalibaf urged citizens to “be frugal” in their spending, stating that government administrators and the public “have a duty to help each other” to ease the economic effects.
Inside the country, the crisis has evolved into a pervasive psychological strain for many. A physical trainer in downtown Tehran said the economic reality has become a mental health crisis for Iranian society. She requested anonymity out of security fears. Her clients can no longer afford her fees, and the few who remain discuss managing signs of depression. “The system is just collapsing. The layoffs are in factories, in companies, in startups, in whatever your work is,” she said in a Telegram voice note, adding she severely cut back on groceries and has not bought meat in two months. She also gave up paying for therapy sessions she began after divorcing her spouse a year ago.
A resident of Karaj, a city near the capital, said insurance sales for car and home policies are plummeting as families are dragged into poverty. The resident, who also spoke on condition of anonymity and joined the January protests, blamed the decline on “severe systemic corruption” and the government’s costly support for militant groups in Lebanon, Yemen and Iraq. “Most people blame the government and its ambitions,” he wrote via WhatsApp.
Despite the hardship, some citizens express defiance toward American demands. Hossein Farmani, a 56-year-old taxi driver waiting for fares in central Tehran, said he did not want to accept a “humiliating” peace with the United States and Israel. Deljoo also said he was supporting his family by only buying what’s absolutely necessary, such as bread and potatoes. “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,” Farmani said.