In recent years, Iran’s economy has faced complex crises, any one of which could destabilize an entire economic system. From energy imbalances and international sanctions to unstable domestic policies and stagflation, all these challenges have severely disrupted the supply chain, production, and foreign trade.
Energy Imbalance and Production Shutdowns
Energy imbalance is one of the most serious problems directly pressuring manufacturing businesses. Electricity and gas shortages have led to frequent outages and a significant increase in production costs. Energy-intensive industries such as steel, cement, and petrochemicals are facing reduced production capacity due to the inability to secure a stable energy supply, which in turn has disrupted the supply chain for raw materials and final products.
Sanctions and Economic Isolation
U.S. sanctions and the potential reimposition of United Nations sanctions following the expiration of Resolution 2231 in October 2025 have placed Iran’s economy under severe strain. These sanctions have restricted access to foreign currency, raw materials, and technology. Import-dependent sectors, such as the cellulose industry, face currency-related bureaucracy and frequent production halts. Additionally, the logistical costs of circumventing sanctions have diminished Iran’s export competitiveness.
Collapse of Foreign Trade
According to customs reports, non-oil exports in spring 2025 fell by 9.3% in weight and 14.4% in value. Petrochemical products suffered the most, with a 28.7% drop in weight and a 24.5% drop in value. Limited export markets, global volatility, and sanctions are among the main causes of this decline. Moreover, the economy’s heavy dependence on petrochemical exports and lack of diversity in the export basket have made Iran’s economy even more vulnerable.
Imports also declined by 4.35% in weight and 11.73% in value, indicating a reduced capacity to procure capital and technological goods. The focus on Asian trade partners and a $1.374 billion non-oil trade deficit have increased pressure on foreign currency reserves and fueled inflation.
Unstable Policies and Business Confusion
Frequent changes in currency, customs, and tax policies have made economic planning impossible. The increase in interest rates from 23% to nearly 40% has made financing difficult for manufacturers. While taxes and insurance premiums are aggressively collected, there is no effective support for production. These conditions have driven many businesses toward closure or downsizing.
Stagflation and Declining Demand
Stagflation, resulting from a combination of external pressures and inefficient domestic policies, has led to a steep drop in domestic demand. The construction industry, which traditionally drives other sectors, has nearly come to a halt. Production of compressed wood panels has fallen from 4 million cubic meters to 1.2 million. Rising production costs and declining profitability have pushed many businesses to the brink of bankruptcy.
A Uncertain and Risky Future
The future of Iran’s economy is highly dependent on political developments. If sanctions intensify, non-oil exports may drop by another 20% to 30%. A military conflict could disrupt export infrastructure and halt oil and gas exports. Even assuming a nuclear agreement, structural and bureaucratic problems would prevent full utilization of any opportunities.
A Futureless Economy
Under the rule of the mullahs, Iran’s economy is trapped in a vortex of domestic and international crises. Energy imbalances, sanctions, unstable policies, and stagflation have paralyzed supply chains and trade. The decline in exports, reduced competitiveness, and trade deficits are clear signs of a bleak future, unless the regime is replaced with a government that serves the people’s interests.
