The collapse of investment in Iran means the halt of production, widespread unemployment, capital flight, the destruction of job security, and the decline in the quality of life for millions of citizens. Official statistics and statements by economic activists show that the Iranian regime is not only incapable of rebuilding the engine of production but has also pushed the economic environment into a stage of chronic instability through ineffective policies.
Lack of investment causes businesses to first reduce production capacity, then lay off workers, and ultimately shut down. Reports published in recent months provide a clear picture of this downward spiral.
Iran’s Economy Beneath the Rubble of War and Structural Collapse
Investment Stopped, Unemployment Began
According to published data, gross fixed capital formation fell to negative 4.3% from March to September 2025. This means the halt of new projects, deterioration of machinery, a decline in construction, and the destruction of employment capacity. Investment in machinery has also dropped from positive growth to negative 2.5%, while construction investment has entered negative territory as well.
This trend has directly targeted the labor market. In the summer of 2025, the number of employed people in the country declined by about 171,000, while at the same time the inactive population increased by more than one million. This means a large portion of society no longer has hope of finding work and has withdrawn from the economic cycle.
The collapse of investment in Iran’s economy is not merely the result of sanctions or war. The crisis is deeper than these simple explanations. Over the years, the economic structure under the control of the Iranian regime, through systematic corruption, a rent-seeking economy, suppression of the genuine private sector, and political uncertainty, has destroyed the motivation for investment. Capital grows in an environment where legal security, economic stability, and predictability exist — elements that have long disappeared from Iran’s economy.
Reports concerning the country’s industries show that around 80% of production units have faced declining activity. Many factories have laid off part of their workforce due to shortages of raw materials, export disruptions, energy outages, and liquidity crises. This situation is not limited to industry; agriculture has been equally affected by collapse.
In agriculture, producers who for years cultivated export products are now facing collapsing prices and the closure of foreign markets. Farmers who once considered production profitable now prefer to lease out their land. When income from renting land exceeds income from production, it means the productive economy no longer has the ability to survive.
A Worn-Out Economy Surrounded by Inflation and Uncertainty
The collapse of investment is impossible without chronic inflation. Inflation exceeding 60% in Iran’s economy has not only destroyed people’s purchasing power but has also eliminated any possibility of economic planning. An investor enters production only when they can predict future costs, exchange rates, and sales markets.
The result of this situation is the growth of speculation and the weakening of production. Instead of entering factories and industry, capital flows into currency markets, gold, housing, and brokerage activities. In such a structure, genuine producers effectively become victims of the Iranian regime’s rent-seeking and inflationary policies.
The energy crisis has also become one of the major factors behind the destruction of investment. Severe electricity and gas imbalances have caused many factories to operate at half capacity or temporarily shut down. How can a producer who faces daily power outages and gas restrictions plan to expand operations?
At the same time, the banking network has effectively ceased playing its developmental role. Although the volume of bank loans has increased, most of these resources are being used to repay previous debts or cover current expenses. Banks are no longer engines of investment; they have merely become mechanisms to prevent the complete collapse of indebted businesses.
On the other hand, the sharp reduction in development spending shows that the Iranian regime has even lost the ability to make public investments. The share of the development budget has fallen to around 4.6%, a figure that reflects the paralysis of infrastructure and development projects. Without investment in infrastructure, the private sector also has no possibility for growth.
The Collapse of Livelihoods Under a Rent-Seeking Economy
The ultimate consequence of the collapse of investment is the destruction of household livelihoods. Widespread unemployment, declining real incomes, and severe inflation have rapidly shrunk the middle class and turned poverty into a widespread phenomenon.
This is the same cycle that economists describe as a widespread recession — a situation in which crisis spreads from one sector to the entire society.
The Research Center of the regime’s Majlis (parliament) has also acknowledged that economic growth had sharply declined even before the recent war. Internet shutdowns, the energy crisis, political uncertainty, and financing problems have caused growth in the services and agricultural sectors to turn negative. This issue shows that the roots of Iran’s economic crisis are not merely in external tensions, but in a worn-out political and economic structure that has lost the ability to generate stability and development.
Over the years, the Iranian regime has destroyed the foundations of economic development by suppressing independent institutions, expanding the rent-seeking economy, and prioritizing political and security objectives.
