Ordinary Iranians are bearing the crushing weight of an economic crisis driven by war and a U.S. naval blockade, with spiraling inflation, mass layoffs, and soaring food prices threatening to push millions below the poverty line while the country's once-prosperous middle class continues to shrink.
The International Monetary Fund has predicted the Iranian economy will shrink by about 6 percentage points in the next year. Iran's official statistics center reported in mid-April that annual inflation was 53.7%, while inflation for food breached 115% compared with the same period last year. Iran's rial currency has lost over half its value in the past year, falling to a record low of 1.9 million to the dollar at the end of last month.
The Human Cost of Economic Warfare
The economic cost of the war and the U.S. naval blockade "has been very substantial and unprecedented for Iran," said Hadi Kahalzadeh, an Iranian economist and research fellow at Brandeis University. "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."
The war will likely push several million Iranians below the poverty line, according to a report published by the U.N.'s development agency in late March. The economic woes helped fuel massive protests that spread across the country in January.
An Associated Press tour of grocery stores in Tehran found large jumps from February, before the war began: chicken and lamb were up 45%, rice 31% and eggs 60%. Alongside items such as milk, the price of tea has risen over 50% since the war began. Parked beneath an overpass in central Tehran, 56-year-old Hossein Farmani was idling alongside other taxi drivers waiting for customers. "If things keep heading in this direction, we're going to suffer a lot more," Farmani said.
Workers Scrambling to Survive
Another driver, Mohammad Deljoo, 73, said he was supporting his family of two children on a daily income of $4. "We only buy what's absolutely necessary, things like bread and potatoes. Even eggs have become too expensive for us," Deljoo said. He said the price for tires and other car parts rose fivefold in less than a year. "One price today, another tomorrow. How is that possible?" he said. There was no shortage of goods in shops, he said, instead blaming the problem on "price gouging."
Amid job losses, many Iranians are scrambling to find new ways to make money. Ali Asghar Nahardani, 32, said the ride-hailing app he works for had not paid him in over a month. He turned to street vending to cover his living expenses. "We're just living day by day, trying to get through this situation while the war conditions continue," he said.
A physical trainer who lives in downtown Tehran described the economic crisis as a mental health crisis for Iranian society. She said many of her clients could no longer afford her fees and training sessions, and the few clients she has left have turned to discussing ways to handle 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 voice note by Telegram. She spoke on condition of anonymity out of security fears. The trainer said she had severely cut back on groceries. "The last time I bought meat was about two months ago." She has also given up paying for therapy sessions that she began after divorcing her spouse a year ago.
Middle Class Collapse Accelerates
The war has marked another step in the ruin of a once large and prosperous middle class following decades of sanctions. By 2019, Iran's middle class had already shrunk to around 55% of the population, explained Mohammad Farzanegan, a professor of Middle Eastern economics at the University of Marburg. New rounds of sanctions as well as wars, corruption and economic mismanagement have further cut that number, he said.
A resident of Karaj, near the capital, said his insurance company had seen plummeting sales for car and home policies. Families are being dragged down into poverty, he said, also speaking on condition of anonymity out of fear of reprisal. The Karaj resident, who joined the mass anti-government protests in January, blamed the yearslong decline on "severe systemic corruption" and the Islamic Republic's costly support for militant groups in Lebanon, Yemen and Iraq. "Most people blame the government and its ambitions," he wrote by WhatsApp message.
Iranian authorities have announced measures to help Iranians bear the crippling prices. But many of these policies, including a 60% hike in the minimum wage and coupon programs for essential goods, are stoking inflation, Taymur Rahmani, an economist at the University of Tehran, wrote recently in a leading business newspaper, Dunya-ye Eqtesad. Since the war began, free bus and metro fares in the capital are also not helping the city's struggling taxi drivers.
Leadership Appeals for Endurance
Iran's leaders have been trying to shore up the homefront by showing sympathy while also urging the public to endure the economic pain for the sake of the war effort. In a series of messages on his official Telegram channel Friday, the new supreme leader, Mojtaba Khamenei, described the current phase of the conflict as an "economic battlefield" and asked employers to "avoid layoffs as much as possible." Khamenei is believed to have been wounded early in the war by Israeli strikes and has yet to appear in public. Parliament speaker Mohammad Bagher Qalibaf, who has emerged as a key player in the war effort and U.S. talks, urged Iranians to "be frugal" in their spending. He said on his official Telegram account that government administrators and the public "have a duty to help each other" to ease economic effects.
The U.S. blockade has restricted Iran's critical Gulf trade. Over 90% of Iranian trade, particularly the oil exports that bring in billions of dollars, flows through its southern ports, Farzanegan estimated. Iran's grip on the Strait of Hormuz is throttling the world's energy supplies and inflicting global economic pain, while the Islamic Republic's own economy is under strain from war and a U.S. naval blockade. Iranians have been hit by spiraling prices for food, medicine and other goods, along with mass job losses and business closures caused by strike damage to key industries and the government's monthslong shutdown of the internet.
Kahalzadeh said Iran has withstood decades of economic pressure and sanctions and its capacity to adapt has not been dismantled. Farmani, the taxi driver, said he did not want to accept what he called a "humiliating" peace with the U.S. and Israel. "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."
Why This Matters:
The economic warfare unfolding in Iran reveals how geopolitical conflicts extract their heaviest toll from working families and vulnerable populations who have no say in the decisions that shape their fate. Millions of Iranians face the prospect of falling into poverty not because of their own choices, but due to the combined pressures of international blockades, military conflict, and domestic governance failures. The collapse of Iran's middle class—already diminished by decades of sanctions—demonstrates how economic pressure campaigns can devastate civil society while leaving political structures intact. As food inflation exceeds 115% and workers survive on $4 a day, the crisis underscores the human cost of strategies that use economic deprivation as a tool of statecraft, raising urgent questions about the ethics and effectiveness of policies that primarily harm ordinary citizens rather than decision-makers.