appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

appConfig

filter

json

liveArticle

Tom Hussain

Three months of war with the United States and Israel may not have broken Iran’s resistance, but its economy has been brought to its knees.
Forty days of American and Israeli bombing in March and early April – targeting energy grids, steel mills, petrochemical plants, ports and transport corridors – were followed by a two-month US naval blockade that sealed off much of what remained.
The damage bill has reached an estimated US$270 billion against a gross domestic product of US$371 billion in 2025.
By that measure, economists say the destruction is almost equivalent in scale to everything Iran lost during its nearly eight-year war with Saddam Hussein’s Iraq in the 1980s – the last time the Islamic Republic posed a sustained threat to shipping through the Strait of Hormuz.

Now, with negotiators convening in Switzerland and a fragile ceasefire holding, the question is whether economic ruin can do what decades of sanctions and military pressure could not.
Last Sunday’s Switzerland summit – the first direct engagement between Washington and Tehran since the ceasefire – ended with both sides agreeing a road map for a final deal with working groups on nuclear matters, sanctions and dispute resolution. A line of communications on the Strait of Hormuz was also established to prevent incidents and ensure safe passage for commercial vessels for the duration of the talks.
Mediators from Qatar and Pakistan reported “encouraging progress” after 18 hours of negotiations.
This first round of talks yielded a 60-day sanctions waiver on US dollar-denominated oil and petrochemical exports, alongside the unfreezing of between US$12 billion and US$24 billion of the US$120 billion in Iranian export earnings seized and held overseas.
This should help keep Iran’s shattered economy afloat for several more months “and stave off another economic shock or crisis”, according to Farzan Sabet, a managing researcher at the Geneva Graduate Institute’s Global Governance Centre.
“But it’s only a drop in the bucket in terms of the damage done by the war and Iran’s medium- to long-term needs.”

The macroeconomic picture is bleak. UNDP simulations published at the end of March projected real GDP growth declining by between 8.8 and 10.4 percentage points relative to a no-war baseline, reflecting disruptions to Iran’s energy infrastructure, trade flows and domestic activity.
Inflation is on course to hit 69 per cent for the full year – the highest since the revolution in 1979 – according to International Monetary Fund estimates.
War-induced shortages have driven price increases of between 125 and 430 per cent on pre-war rates for staples such as wheat, rice, eggs and cooking oil, while food price inflation is expected to top 100 per cent by year-end, against nearly 58 per cent in 2025.
Between 3.5 million and 4.1 million more Iranians have been pushed below the international poverty line of US$8.30 a day for upper-middle-income economies, lifting the national poverty rate towards 41 per cent, up from 36.3 per cent in 2023.

The structural damage runs deeper still. Air strikes destroyed around 24,500 commercial and industrial sites and 125,000 public civilian facilities, triggering what former Iranian government economist Hadi Kahalzadeh described to This Week in Asia as a “cascading national crisis”.
The steel sector – a core input for roughly 42 per cent of Iran’s industrial supply chain – was severely hit, damage that was “especially significant”, Kahalzadeh said, given steel’s role as a foundational input across Iranian industry.
Petrochemicals, which account for 43 per cent of non-oil exports and underpin everything from agriculture and pharmaceuticals to auto parts and construction materials, were similarly battered.
Kahalzadeh estimates resulting job losses of between 2.5 million and 4 million, or some 10 to 15 per cent of the labour force.

Even before the war, Iran’s economy was buckling under sanctions, currency depreciation and chronic underinvestment. But it was functioning. The war “changed the nature of this crisis”, Kahalzadeh said, by systematically dismantling the infrastructure on which economic life depends.
Yet Tehran is not simply suing for peace – a distinction that analysts say could shape what comes next.
Iran’s leadership is approaching these talks from a position of having survived a months-long war, a bruising naval blockade and seven years of Washington’s maximum-pressure sanctions without capitulating.
Kahalzadeh, currently a research fellow at Brandeis University’s Centre for Global Development and Sustainability in the US, said Iran’s rulers viewed the negotiations as much as a test of Washington’s intentions as a plea for relief.


“That matters for how the leadership reads the situation,” he said. “They want to know whether Washington has learned that war and maximum pressure can damage Iran, but cannot force strategic surrender.”
Tehran was not only seeking economic relief, it was also testing whether the US was “willing to move away from a pressure-first policy and towards a more reciprocal framework”, he added.
At the heart of any final agreement lies the question of Tehran’s nuclear programme. Before the war, Iran was enriching uranium to levels of up to 60 per cent – close to weapons-grade – and held more than 400kg (882lbs) of highly enriched uranium, according to the International Atomic Energy Agency.
The status of Iran’s nuclear infrastructure after months of bombardment remains unclear, with IAEA inspectors still unable to gain full access to key facilities. Washington had demanded the destruction of Iran’s three main nuclear facilities and the transfer of all enriched uranium stockpiles to US custody, but Tehran flatly rejected those terms.
Since Donald Trump withdrew Washington from the 2015 nuclear deal with Tehran during his first term as US president and launched his maximum-pressure campaign, Iran has suffered repeated economic shocks that have driven four popular uprisings in eight years, or roughly one every two years.
The long-term survival of the regime depends on stabilising the country’s economic situation
Farzan Sabet, Middle East researcher
Those uprisings – sparked by petrol price rises in 2019, the accidental shooting-down of a Ukrainian passenger jet in 2020, the death of a young woman in custody in 2022 and a fresh wave of protests ignited by currency collapse in late December 2025 – each drew brutal crackdowns but failed to topple the regime.
Each was also fed, at least in part, by economic misery. Analysts say Iran’s leadership is acutely aware of the pattern.
“The long-term survival of the regime depends on stabilising the country’s economic, and by extension social, situation,” Sabet said.
Kahalzadeh said Iran could survive sanctions and economic pressure, but another round of war targeting energy, transport and industrial infrastructure would be “devastating”.
Preventing that “may be even more important than the direct economic concessions”, he said.


Iran survived 3 months of war. Can it survive the aftermath?

US strikes Iran after Trump says cargo ship attack violated ceasefire

Hong Kong power firms to give residential customers rebates as bills soar

When geography is destiny, Gulf states must diversify their defence, expert says in Dalian

US-Israel war on Iran

Smoke and flames rise from the site of US-Israeli airstrikes on an oil depot in Tehran on March 7. Photo: Sasan/Middle East Images/AFP/Getty Images/TNS

A residential building that was damaged in a US-Israeli strike earlier this year is seen in Tehran, Iran, on June 7. Photo: West Asia News Agency/Reuters

US Vice President J.D. Vance speaks to the media after the US and Iran held high-level talks in Switzerland on Monday. Photo: Reuters

Iranians shop for clothes at a roadside vendor near Vanak Square in Tehran on June 10. Photo: AFP

Copies of an Iranian daily newspaper bearing an image of US President Donald Trump and a headline that reads “Gone with the wind” are displayed at a kiosk in Tehran on June 18. Photo: AFP

No victory, no defeat: Iran war pauses with fragile freeze

Smoke rises behind the Azadi Tower in Tehran following a US-Israeli military strike on Iran in early March. Photo: ISNA/AP

An American warship fires missiles from an undisclosed location in March amid the US-Israel war on Iran. Photo: US Central Command/Reuters

(From left) Saudi Arabia’s foreign minister meets his Pakistani, Turkish and Egyptian counterparts in Islamabad for talks on the Iran war in March. Photo: Pakistan’s Ministry of Foreign Affairs/Xinhua

Smoke rises from an Israeli bombardment of a village in southern Lebanon on Sunday. Photo: AFP

A woman in Tehran walks past a giant billboard depicting Iranian missiles and a sword on June 10. Photo: AFP

US President Donald Trump and Vice President J.D. Vance monitor strikes on three Iranian nuclear enrichment sites carried out on June 21 last year. Photo: The White House/Getty Images/TNS

2 wars later, US-Iran nuclear diplomacy returns to square one

Iran’s President Masoud Pezeshkian holds a memorandum of understanding document showing his signature and that of US president Donald Trump, in Tehran on Wednesday. Photo: AFP

Iranian President Masoud Pezeshkian, second right, listens to head of Atomic Energy Organisation of Iran Mohammad Eslami as he visits an exhibition of Iran’s nuclear achievements, in Tehran, Iran, on April 9, 2025. Photo: AP

An Iranian security official in protective clothing walks through part of the Uranium Conversion Facility just outside the Iranian city of Isfahan in 2005. Photo: AP 

This Week in Asia

Politics

News

World

Middle East

US$270 billion in damage and 4 million citizens plunged into poverty may have broken Iran’s economy


US$270 billion in damage and 4 million citizens plunged into poverty may have broken Iran’s economy.


Iran survived 3 months of war. Can it survive the aftermath?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}US$270 billion in damage and 4 million citizens plunged into poverty may have broken Iran’s economy

US$270 billion in damage and 4 million citizens plunged into poverty may have broken Iran’s economy