Iran’s gross domestic product contracted 10.1% year on year in the first quarter of the Persian calendar, including the oil sector, according to data from the Statistical Center of Iran. The period ran from late March to late June and saw the country come under Israeli and US bombardment.
The contraction data take on added significance given the Iranian economy’s heavy reliance on fuel exports, which have been hit by restrictions imposed on ports, international sanctions and disruptions to shipping in the Strait of Hormuz.
IMF forecasts 5.4% contraction
The International Monetary Fund expects Iran’s gross domestic product to contract by 5.4% this year, according to its latest forecast, issued last July.
Iran’s gross domestic product stood at $362.7 billion in 2025, according to World Bank data, while the population exceeded 92 million and average per capita income was about $3,900 a year during the same period.
War puts pressure on oil exports
The war broke out after Israel and the United States launched an attack on Iran on February 28, before a ceasefire took effect in April following 40 days of clashes. Tehran and Washington signed a memorandum of understanding in June to end the conflict, but hostilities later resumed.
The United States reinstated a blockade of Iranian ports, harming oil exports that were already struggling because of international sanctions. Shipping through the Strait of Hormuz was also disrupted; before the war, about 20% of global oil supplies passed through it.
Inflation and the rial deepen cost-of-living pressures
The dollar exchange rate reached record levels of 2.3 million rials in the markets, as the annual inflation rate climbed to 69.9% in August, up 3.9 percentage points from the previous month, according to the Statistical Center of Iran. Food-group prices rose 128% from the same month a year earlier.
Rising prices and the weakening currency eroded purchasing power and made it more difficult to obtain basic goods and housing, as Iran’s economy faces the fallout from US sanctions and import restrictions.
Gasoline price doubled for heavy users
Iranian authorities raised the price of gasoline at the beginning of September for heavy users whose monthly consumption exceeds 110 liters, from 50,000 rials to 100,000 Iranian rials per liter, following an operation the US administration called “Economic Outcast” aimed at cutting off the lifelines of the Iranian economy.
Experts warned that higher gasoline prices could add to inflationary pressures by increasing transport and production costs, particularly given the widespread use of old, fuel-intensive vehicles and the difficulty of importing new cars and spare parts because of US sanctions.
