Israel’s strikes and Trump’s blockade have battered Iran’s economy

Iran’s Economy Reels Under Impact of U.S. and Israeli Strikes

Iran’s industrial heartland lies in ruins following more than five weeks of U.S. and Israeli bombardment that has devastated thousands of factories across the country. The economic damage has spread far beyond military targets, threatening millions of jobs and pushing the already fragile Iranian economy toward potential collapse.

In Kashan, the historic center of Iran’s renowned carpet-making industry, an estimated 80% of manufacturers have ceased operations. The son of one rugmaker, speaking on condition of anonymity from the United States, described unprecedented distress among producers. “Never have I heard my father so upset,” he said of his family’s factory, which typically produced hundreds of machine-made rugs monthly but now sits idle with 20-30 employees facing uncertain futures.

The strikes have crippled key industrial sectors vital to Iran’s economic independence. Steel production has ground to a halt after Israel targeted major producers including Mobarakeh Steel and Khuzestan Steel in the final days before the April 8 ceasefire. Over 50 petrochemical complexes have also shut down, according to Iran’s semi-official Jamaran news agency.

These twin blows have devastated Iran’s most significant non-oil exports and created cascading effects throughout the economy. Petrochemical products are essential components in everything from plastics to textiles, while steel is fundamental to construction and manufacturing. Prices for basic materials have skyrocketed, with iron sheeting costs more than doubling.

The human toll is mounting rapidly. Deputy Labor Minister Gholamhossein Mohammadi acknowledged that at least one million jobs have been directly lost due to the war. However, Hadi Kahalzadeh, an Iranian economist and research fellow at Brandeis University, warns the actual impact could be far worse, with 10-12 million jobs at risk – representing approximately half of Iran’s entire labor force.

“All the country’s industries in some way rely on our petrochemical industry,” explained Mehdi Bostanchi, a factory owner and member of a council representing Iranian industrialists. Even businesses without direct ties to steel or petrochemicals typically have contracts with companies that do, creating a ripple effect throughout the supply chain.

The strikes have also hit civilian infrastructure crucial to public health. Tofigh Daru, Iran’s largest pharmaceutical holding company that produces anticancer medications among other vital drugs, was among the targets. Optics manufacturers, chemical developers, and aluminum and cement factories have likewise been damaged or destroyed.

For ordinary Iranians, daily life has become increasingly difficult as prices for essential goods soar. Chicken costs have jumped 75% in just the past month, while beef and lamb prices have surged 68%. Many dairy products are now 50% more expensive, with packaging shortages exacerbating supply problems.

The economic crisis extends beyond physical damage. Widespread internet restrictions implemented after recent protests have devastated small and medium-sized businesses dependent on online sales. Additionally, trade relations with the United Arab Emirates – previously the source for about a third of Iran’s imports – have been severed following Iranian strikes on the country.

The U.S. naval blockade of Iranian ports threatens to deliver another crippling blow by cutting off crucial imports and oil exports worth tens of billions of dollars annually. Oil exports alone account for nearly half of Iran’s $98 billion in annual export revenues.

In response, Iran has closed the Strait of Hormuz, a critical global oil shipping route, vowing to reopen it only if the blockade ends and hostilities cease. Iranian leaders appear to be wagering that their economy – hardened by decades of international sanctions – can endure economic hardship longer than the U.S. under President Donald Trump’s administration.

The government is attempting to reassure citizens it can weather the storm, promising increased unemployment insurance and highlighting stockpiles of essential goods. Economic expert Esfandyar Batmanghelidj of the Bourse and Bazaar Foundation notes that Iran maintains significant reserves of vital supplies, including electrical machinery for nearly eight months and cement for almost six months.

However, the economic pressure has already provoked unrest. In January, protests triggered by worsening inflation evolved into calls for the end of the Islamic Republic before authorities cracked down. As savings dwindle and unemployment spreads, even educated professionals are feeling the strain.

“I am at the top 1% [of society], and I am without a job. I am super worried about my future,” said one Tehran resident who recently left his engineering position only to find his new job prospect evaporating. He warned that many Iranians’ savings will be depleted within weeks.

The path to recovery remains uncertain. While Bostanchi believes Iran’s economy could rebound after the war, he acknowledges that meaningful recovery depends on whether international sanctions can be lifted. “If we cannot lift the sanctions in any agreements, then no, the optimistic forecast… will not happen,” he concluded.