Before the first strike landed, Iran's economy was already facing worsening conditions, with the government desperately trying to contain rising inflation and currency devaluations through subsidy reforms. Iran is now far from the post-Covid recovery it experienced under hardline President Ebrahim Raisi.
His moderate successor, Masoud Pezeshkian, had aimed at bringing the annual inflation rate below 30% for the Iranian year 1404 (March 2025 to March 2026). Instead, Central Bank data shows the rate passed 50%, and the trend only accelerated since the start of the war, with year-on-year inflation for April reaching 73% per the Statistics Centre.
Despite government efforts, Iran is firmly engaged in a slippery slope where uncharted territory continues to be discovered. Each year breaks new psychological barriers, with the U.S. dollar slowly but surely inching toward 2,000,000 Iranian rial and today's high-end smartphones costing more than yesterday's entry-level cars.
This is where U.S. policy is successful. The population is constantly pushed to the brink, and while economics cannot tell us where the breaking point is, all the underlying factors for renewed protests are already there.
The fact that the Iran war initially saw kinetic strikes on economic sites before morphing into a blockade of ports shows there is little hope for a JCPOA 2.0 with the U.S. that could give Iranians the much-needed breathing room.
Even in the implausible case where a deal is reached, the way the state has geared the economy toward resistance, self-sufficiency and autarchy will be a direct impediment to Iran's development.
What was hit and why it matters
The civilian targeting logic of the U.S.-Israeli air campaign fell most heavily on two sectors: steel and petrochemicals. Both are load-bearing pillars of Iran's non-oil export economy, together generating approximately $20-25bn annually, and both are deeply integrated into downstream industrial chains that amplify their damage well beyond the factories themselves.
Iran lost approximately 25-30% of its steel output, around 10 million tons, for at least one year following strikes on Mobarakeh Steel Company in Isfahan and Khuzestan Steel Company.
