Iran is implementing a coordinated response to severe economic pressures stemming from US and Israeli military operations and sanctions. President Masoud Pezeshkian convened cabinet members to address the deteriorating financial situation affecting Iranian citizens, particularly rising costs of living and currency depreciation.
The Iranian economy has contracted significantly since military conflict began, with gross domestic product declining 10 percent as energy exports collapsed due to a US naval blockade. The Iranian rial has reached record lows, and a subsequent US operation initiated in late August aimed to further isolate the country from international trade. Pezeshkian has characterized these efforts as an attempt to sever the country’s economic lifelines.
The impacts on ordinary Iranians have been substantial. Food prices have risen sharply, prompting consumers to shift toward cheaper alternatives. A US naval blockade on southern ports has restricted agricultural imports, forcing reliance on inefficient alternative routes through the Caspian Sea and land transportation, which carry significantly smaller loads. Raw materials for pharmaceutical production have become increasingly scarce and expensive, while disruptions to air travel have raised concerns about medicine availability. Packaging costs have increased, creating additional supply chain challenges for businesses.
In response, Iran’s Plan and Budget Organisation presented a seven-point economic package to address the crisis. Pezeshkian subsequently ordered creation of a committee including the central bank governor, interior minister, and Tehran’s mayor to coordinate stabilization efforts and help vulnerable populations, including female-headed households. The government is pursuing energy efficiency measures, including proposed car-free days to conserve fuel and electricity. Despite Iran’s status as a major oil and gas producer, the country has experienced petrol shortages and power outages since conflict began.
Economists have offered mixed assessments of the response. While one former government adviser acknowledged that earlier preparation would have been preferable, he expressed confidence that existing stocks and alternative trading partnerships would sustain basic commodity supplies if the blockade persists.
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