The recent war between the United States, Israel, and Iran’s regime was not merely a military confrontation; rather, it acted as a structural blow to an already exhausted economy. This war made the deep fractures within the economy under the regime’s control more visible and accelerated the process of collapse. Severe economic contraction, rising poverty, and setbacks in human development are only part of the consequences of this situation.
The burden of war on the economy
The war directly targeted the economy’s vital infrastructure. The destruction of power plants, disruption of trade routes, and stoppage of industrial production were the three main channels through which the crisis was transmitted into the economy. As a result, gross domestic product faced an unprecedented decline, one that according to estimates could exceed a 10 percentage-point drop.
Mass Worker Layoffs in Iran’s Industries Under the Shadow of War
This decline is not merely a number; it means a collapse in the living standards of millions of people. In conditions where chronic inflation and the devaluation of the national currency had already weakened the economy before the war, the wartime shock further intensified this trend. The inflation rate, which had remained above 40% for years, has now reached levels close to 55%.
On the other hand, the devaluation of the rial (Iran’s national currency) caused a sharp increase in import costs. This placed additional pressure on households, especially regarding essential goods. The result of this trend has been a severe decline in purchasing power and a shrinking of people’s ability to afford basic necessities.
At the macro level, the dependent and inefficient economic structure of Iran’s regime lacked the capacity to absorb this shock. An economy already under pressure from sanctions and mismanagement is now facing deeper disruption.
The expansion of poverty and social collapse
The war, more than anything else, struck the lower income deciles. Historical experience shows that in military crises, these groups suffer the most. In Iran as well, this pattern is clearly visible.
Estimates show that before the war, about 36% of the population lived below the poverty line. Now this figure has approached more than 40%. This increase involving several million people is not merely a statistical shift; it indicates the widespread fall of the middle class below the poverty line.
At the same time, population displacement and housing destruction have worsened living conditions. Thousands have been forced to leave their homes, and access to essential services such as education and healthcare has been disrupted. This situation reinforces a cycle of poverty and inequality that will be extremely difficult to escape.
Food inflation has also played a decisive role as one of the most important pressure factors. Rising food prices, which have a regressive effect, have inflicted the greatest damage on low-income households. Under such conditions, food security has become a serious challenge.
Setbacks in human development
The war has pushed back not only the economy but also human development indicators. The decline in per capita income, disruption in education, and pressure on the healthcare system are the three main dimensions of this regression.
The destruction of schools and closure of educational centers have disrupted the learning process. This disruption will have long-term consequences for human capital. A decline in educational quality means lower workforce productivity in the future.
In the health sector as well, pressures have sharply increased. Rising casualties and damage to medical infrastructure have placed the healthcare system in a critical condition. As a result, access to treatment services has become limited for a large part of society.
On the other hand, the destruction of the environment and productive infrastructure threatens livelihood security in the long term. Together, these factors have reduced the human development index and erased years of progress.
A war-stricken economy and structural deadlock
The war showed that the economy under the control of Iran’s regime is not only fragile against external shocks, but itself becomes a factor intensifying the crisis. Heavy dependence on energy revenues, structural weakness in production, and lack of transparency have made this economy highly vulnerable.
Attacks on the petrochemical industry, which is one of the main sources of foreign currency earnings, are one example of this vulnerability. Disruption in this sector has not only reduced exports but also created a chain of production stoppages in dependent industries.
At the same time, the destruction of industrial infrastructure and widespread business closures have created a wave of unemployment. This unemployment, in turn, has reduced domestic demand and intensified the economic recession.
The tourism industry, as one of the vulnerable sectors, has also suffered heavy losses. Reduced travel and the destruction of facilities have pushed this industry to the brink of shutdown.
Overall, in the aftermath of this war, Iran’s economy has entered a phase of structural collapse—a phase in which even a return to the previous condition is met with serious doubt.
