Nearly six months into the war with the United States and Israel, Iran’s economy is contracting sharply under the weight of US sanctions and a US naval blockade, according to reports from Al Jazeera and the Associated Press. President Masoud Pezeshkian acknowledged that foreign trade has shrunk by more than a third, while annual inflation reached 66 percent last month.
Economic Toll and Trade Decline
According to Al Jazeera, President Pezeshkian stated during a state media broadcast that Iran’s exports and imports slumped by nearly 35 percent due to the combined impact of US sanctions and the naval blockade of Iranian ports. Despite these restrictions, Pezeshkian noted that Tehran managed to sell approximately 90 million barrels of oil during a short-lived Memorandum of Understanding signed with Washington in June, which temporarily permitted oil sales.
Daily life for residents has grown increasingly difficult. According to interviews conducted by Al Jazeera, citizens in Tehran report that prices have surged and employment opportunities have shifted. Omid, who operates a food business, told Al Jazeera that trade has dried up as rents increase, noting that businesses can barely afford to pay workers.
Inflation and Household Impact
According to the Associated Press, grocery store shelves remain stocked, but many families can barely afford basic items. Rice prices have risen by 60 percent and beef by 150 percent compared to pre-war levels. The International Monetary Fund forecasts that inflation in Iran will approach 70 percent by the end of the year, with the overall economy shrinking by more than 5 percent, according to the Associated Press.
Ahmad Karimi, a 52-year-old taxi driver and father of two interviewed by the Associated Press, said he works 15-hour days to make ends meet, cutting out fruit, protein, and leisure activities. Similarly, a 41-year-old mother of two from northern Iran told the Associated Press that purchasing basic necessities has become the primary priority, noting that meat is frequently excluded from family purchases due to high costs.
Leadership Response and Regional Diplomacy
Supreme Leader Ayatollah Mojtaba Khamenei called on the government to address the ongoing financial crisis. In a written statement reported by Al Jazeera, Khamenei emphasized the need to tackle inflation, unemployment, and the management of prices for goods and services. The Iranian government formally described diplomacy and defense as two complementary wings for protecting national interests, signaling an intent to pursue both paths.
Regional diplomacy has also continued alongside military postures. Qatari Prime Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani met with Iranian leaders in Tehran to discuss restoring open shipping through the Strait of Hormuz, talks that Iranian Foreign Minister Abbas Araghchi described as creative, according to Al Jazeera.
Military Posture and Sanctions Outlook
Iran’s military leadership struck a defiant tone amidst the economic strain. Army commander-in-chief Amir Hatami told the Fars news agency, as reported by Al Jazeera, that despite attempts by enemies to destroy drone and missile capabilities, the nation’s stockpile was fired with high intensity. Acting Defence Minister Majid Ibn Reza added in a statement to the Tasnim News Agency that Iran holds future surprises for its adversaries.
Meanwhile, the Trump administration has indicated plans to implement even tougher sanctions to increase pressure on Tehran. However, experts suggest that Iran’s long experience with Western sanctions has built a robust resistance capacity. Hadi Kahalzadeh, an expert on Iran’s economy at Brandeis University, told the Associated Press that this resilience prevents economic pain from immediately translating into the political changes anticipated by the United States.