Behind Tehran’s calm, Iran faces deepening economic collapse

Iran’s Economy Under Strain: Currency Plunges, Prices Surge Amid War and Sanctions

Tehran, Iran – Beneath the apparent calm of Tehran’s reopened cafés and resumed traffic, the Iranian economy is buckling under the weight of war, sanctions, and a collapsing currency. The rial has hit record lows, inflation is running at historic highs, and ordinary citizens are struggling to afford basic goods. In recent days, Iran and the United States have exchanged fire in the Persian Gulf, straining an already fragile ceasefire and deepening economic uncertainty.

Currency Freefall and Surging Prices

The Iranian rial has plunged to an all-time low of 1.84 million against the US dollar in the open market, with currency deals scant amid market volatility, according to reporting by Al Jazeera. The national currency has become a liability that citizens are desperate to offload, as one Tel Aviv University economist described it to the Jerusalem Post. Even before the latest military escalations, Iran was grappling with an inflation rate of approximately 70 percent—the highest since World War II, the same source noted.

Prices of food, medicine, cars, and electronics have soared. A 256GB iPhone 17 Pro Max, priced by Apple at $1,200 in the US, was being offered at close to 5 billion rials (about $2,750) in some Tehran shops, while others refused to sell, Al Jazeera reported. A Peugeot 206, a modest French car also produced in Iran, now costs an eye-watering 30 billion rials ($16,500). Imported cars are even harder to find.

Government Measures and Economic Experts’ Warnings

In response, Iranian authorities have announced measures to help citizens bear the rising costs. These include a 60% hike in the minimum wage and coupon programs for buying essential goods. However, Taymur Rahmani, an economist at the University of Tehran, wrote in the business newspaper Dunya-ye Eqtesad that many of these policies are stoking inflation, as reported by Africa News. The new monthly minimum wage now stands at over 160 million rials—a figure that converts to just $104, according to the Jerusalem Post.

Impact on Ordinary Iranians

The human cost of the devaluation is staggering. A 56-year-old taxi driver in central Tehran, Hossein Farmani, told Africa News that the price of a pound of tea has risen over fifty percent since the war began. “If things keep heading in this direction, we’re going to suffer a lot more,” he said. Free bus and metro fares in the capital, introduced since the war began, have done little to help taxi drivers compete with public transport.

Broader Economic Damage

The war with the US and Israel, combined with US sanctions and a naval blockade, has inflicted serious damage on Iran’s key industries and infrastructure, according to Africa News. Job losses and business closures are widespread, exacerbated by a near-total internet shutdown imposed by the authorities, now in its 64th day, as Al Jazeera reported.

Leadership’s Response

Iran’s new Supreme Leader, Mojtaba Khamenei, has called for the country to defeat its enemies in an economic and cultural struggle as well as militarily, as reported by Al Jazeera. Tehran has also insisted on retaining some control over the Strait of Hormuz, a strategic waterway at the mouth of the Gulf, and has demanded the lifting of the US blockade and sanctions before entering negotiations over its nuclear program, according to Africa News.

Outlook

Economists and analysts differ on the trajectory of Iran’s economy. Prof. Amos Nadan of Tel Aviv University, speaking to the Jerusalem Post, described the currency as “fundamentally unstable.” Eyal Hashkes, a strategic consultant, suggested the worst might not be over: “When there isn’t much economic activity in Iran—as there wasn’t during the war—there isn’t much opportunity for the currency to weaken dramatically. The moment life returns to full normal…” His comment underscores the uncertainty facing Iran’s economy as it navigates war, sanctions, and domestic pressures.

One estimate suggests the timeframe for rehabilitating the national economy could be at least 12 years, according to the Jerusalem Post. However, such projections remain speculative given the volatile situation.

Perspectives

Iranian Government Perspective: Tehran blames US sanctions and the naval blockade for the economic crisis, while insisting on maintaining control over the Strait of Hormuz. The government has implemented wage hikes and subsidy programs to cushion the impact on citizens.

International Analysts’ Perspective: Some economists and strategic consultants view the currency collapse and inflation as symptoms of deeper structural instability, exacerbated by military conflict and sanctions. They warn that government measures may fuel further inflation. Others, while acknowledging the severity, caution against predicting a total collapse, noting that reduced economic activity during the war may have limited additional depreciation of the rial.