For years, Iran's economy has struggled as international sanctions and administrative mismanagement took their toll. Since US and Israeli air strikes hit the country on February 28, the situation has grown markedly worse.
Already decrepit infrastructure has been targeted in the strikes, knocking out factories, steel mills, bridges, and ports. Even worse, oil and gas facilities have been struck, while a US blockade on all traffic calling at Iranian ports still functioning has all but cut off Tehran's main lifeline: oil money.
With the currency at historic lows against the dollar and an Internet shutdown crippling businesses, analysts say Iran's economy is now in uncharted territory.
"So, unless the regime seeks concessions from the US to lift the blockade, the economy will have to remain extremely depressed," said Jason Tuvey, deputy chief Emerging Markets economist at the London-based Capital Economics.
"But ultimately, this comes down to the degree of economic pain that the Iranian regime is willing to bear to achieve its military and geopolitical objectives," he added.
The situation has become so bad, senior officials can no longer deny the damage.
Iran's central bank governor, Abdolnaser Hemmati, has reportedly urged President Masud Pezeshkian to take urgent steps to stabilize the economy, including restoring full Internet access and pursuing a peace agreement with Washington.
Government spokesperson Fatemeh Mohajerani has put total damage to infrastructure and residential and commercial property from the war at $270 billion -- roughly nine times Iran's entire 2025 public budget, and equivalent to around 60 percent of the country's economic output, according to the economic news site Eghtesad News.
Iranian officials are estimating reconstruction costs at around $300 billion in damages for civilian infrastructure alone, while further costs will come from other disruptions to the economy such as lost business and the need for increased social payments.
According to Gholamhossein Mohammadi, Iran's deputy minister of labor, preliminary estimates show that the conflict has resulted in the loss of more than one million jobs and left two million people directly or indirectly unemployed.
The timing of the war has compounded the devastation to Iran's labor market.
According to Iranian economic daily Donya-e Eqtesad, spring is traditionally peak hiring season -- job platform Iran Talent says a typical spring month sees around 65,000 vacancies. This year, available positions collapsed by 80 percent. For every five jobs that existed last spring, four are now gone.
On the demand side, the numbers are just as stark. On May 5, job platform Jobvision recorded a single-day record of 318,000 résumés submitted by job-seekers -- 50 percent above the platform's previous all-time high of 212,000. The gap between those looking for work and the work available has never been wider.
Meanwhile, analysts say the destruction of the economy has been exacerbated by the state-imposed Internet blackout, now in its 66th day.
The shutdown costs Iran's digital economy between $30 and $80 million every single day, gutting e-commerce, logistics, and the technology sector, not to mention smaller entrepreneurs whose businesses have ground to a halt.
In a sign of growing concern, the Content Production and Publishing Union, representing businesses operating in the digital space, called for safe Internet access for Iranians.
In a cautiously worded statement issued on May 4, the union said that, while it supports government decisions in emergency conditions, any policy in this area should be developed with private sector participation.
"The livelihoods of millions of Iranians built on digital foundations should not be a plaything of factional political interests," the union said.
The Iranian rial has collapsed in parallel. The currency now trades at around 1.9 million to the dollar on the open market -- more than double its rate a year ago, according to TGJU, Iran's gold and foreign exchange market tracker.
With oil revenues blocked by the US naval blockade and businesses unable to generate taxable income, the government faces a structural financing crisis.
Speaking to RFE/RL’s Radio Farda, Dalga Khatinoglu, an Iran energy expert based in Azerbaijan, said Iran will have to reduce its oil and gas output if the blockade continues because it is running out of storage.
He estimated that if the US blockade goes on for another month, Iran’s oil production will drop by 1.2 million barrels per day.
“This will be very painful for Iran,” Khatinoglu said.
The fiscal consequences extend beyond lost output.
Iranian economist Majid Salimi Borujeni, writing in the Jahan-e-Sanat economic daily, warned that any boost to oil revenues from higher oil prices during the Strait of Hormuz closure is temporary and that post-war reconstruction costs will far outweigh it.
With no reliable revenue streams available, he argued, monetary financing of the deficit -- effectively printing money -- may be the only option left, a path that risks accelerating inflation already running above 70 percent.
