Why Trump’s war has not broken Iran’s economy

Iran’s economy has resisted collapse despite escalating US and Israeli attacks and a naval blockade, though severe strain persists. The country faced pre-war challenges like 1.5% GDP contraction in 2025, soaring inflation eroding affordability of staples like meat and rice, and a rial currency crash that triggered deadly protests. Sanctions and disrupted exports have tightened dollar shortages, forcing price controls and inefficient exchange-rate systems that deepen economic instability. The June 2025 Israel-US war inflicted $270 billion in damages—equivalent to nearly Iran’s 2026 GDP—destroying civilian and industrial infrastructure, including gas fields and steel plants. Six weeks of strikes forced mass business closures, halting daily economic activity, with the IMF forecasting a 6.1% GDP drop this year, the steepest in decades. The rial’s continued decline fuels inflation, while Iran’s closure of the Strait of Hormuz disrupts global energy supplies. Government efforts to ease hardship—such as central bank leadership changes, wage hikes, and early subsidies—have been limited by stretched finances. Price controls and currency mismanagement have worsened shortages, pushing Iranians to substitute expensive proteins like meat for cheaper alternatives. The war’s toll has deepened reliance on state resilience, but prolonged conflict risks further destabilization. Iran’s ability to endure economic pain stems from decades of sanctions experience, though the current crisis tests global supply chains. The IMF’s projections highlight the war’s outsized impact, with damages nearing annual GDP, while domestic instability persists amid limited relief options. The Strait of Hormuz closure adds pressure, threatening broader commodity markets as tensions with the US and Israel remain unresolved.