Iran Economy Contracts 10% Amid US-Israel War

Iran’s economy contracted by 10.1 percent year-on-year during the first quarter of the Persian calendar, as the ongoing US-Israel war severely disrupted the country’s oil and gas industry, according to official data.

The Statistical Center of Iran said gross domestic product (GDP) fell by 10.1 percent between March 21 and June 20, covering the opening months of the conflict that began on February 28.

The energy sector suffered an even sharper decline, with crude oil and natural gas activity falling by 26.4 percent compared with the same period last year. GDP excluding oil declined by 4.6 percent.

Other sectors were also affected. Industry and mining contracted by 14.7 percent, services fell by 4.8 percent, while manufacturing declined by 2.5 percent. Agriculture was the only major sector to record growth, expanding by 2.3 percent.

Iran is also facing severe inflation and currency depreciation. The country’s 12-month average inflation rate reached 69.9 percent earlier this month, while food, beverage and tobacco prices increased at nearly twice that rate. Official unemployment rose to 9.1 percent in the spring.

The Iranian rial has also weakened significantly, falling from about one million to the US dollar a year ago to more than 2.2 million per dollar in early September.

Oil exports suffer major decline

Iran’s oil exports have been heavily affected by the US naval blockade, which has been in place for much of the war.

According to estimates from Kpler and Vortexa, Iranian crude and condensate loadings dropped from about two million barrels per day in March to approximately 740,000 barrels per day in July. In August, loadings fell further to between 220,000 and 255,000 barrels per day.

TankerTrackers.com reported that 29 tankers carrying about 36.11 million barrels of Iranian crude were trapped in the Strait of Hormuz.

Meanwhile, Vortexa estimated that Iran’s total crude oil afloat fell from 135 million barrels at the end of July to 107 million barrels by late August.

Iranian President Masoud Pezeshkian said on September 6 that the country’s total trade had declined by between 25 and 35 percent, with imports suffering a greater impact than exports.

Tehran has linked the lifting of economic pressure to any potential end to the war. Iranian security chief Mohsen Rezaei said Iran’s conditions include the release of frozen Iranian funds and an end to the naval blockade.

The United States has also intensified economic pressure on Tehran, with US Treasury Secretary Scott Bessent announcing measures targeting Iran’s financial interests and sources of revenue, including oil.

Diplomatic efforts continue

Despite the economic and military pressure, Iran has continued to signal its willingness to pursue diplomacy.

Rezaei said on Saturday that Tehran had communicated a formal set of conditions to Washington through Qatari mediators as part of efforts to end the conflict.

Pakistan and Qatar are also working to revive negotiations between Iran and the United States after their memorandum of understanding expired last month.

Iranian state media reported that Pakistani Interior Minister Mohsin Naqvi was expected to visit Tehran, while Iranian Foreign Minister Abbas Araghchi was due to stop in Qatar before travelling to New York for the United Nations General Assembly.

Iran has nevertheless warned that it remains prepared for possible renewed US military action.

The continuing economic contraction, declining oil exports and disruption to trade have placed significant pressure on Iran’s economy as diplomatic efforts continue to seek an end to the nearly seven-month-old war.

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