Iran’s economy in charts: hyperinflation and depreciation of the rial

The war in the Middle East has sent Iran’s already fragile economy into free fall.

Tehran’s main war tactic is economic damage. Iran’s attacks targeted energy infrastructure in neighboring countries and closed off the vital Strait of Hormuz, through which about 20% of the world’s oil and gas was transported before the war, causing the worst energy shock in decades.

However, its economic position is precarious.

Before the conflict, Iran was already under pressure from sanctions. Inflation exceeded 50% in 2025. Its currency, the rial, lost 60% of its value in the months following last July’s 12-day war with the United States.

Food inflation soared to 64% by October last year, accelerated to 105% in February, with bread and cereals rising 140% and fats and oils rising 140% in the year to March 2026.

Iranian banks last month began distributing 10 million riyal banknotes, the largest denomination in the country’s history, as authorities seek to curb inflation and meet demand for cash.

In its World Economic Outlook, the International Monetary Fund estimates that Iran’s economy will contract by 6.1% in 2026, with an inflation rate of 68.9%. The currency depreciated to approximately 1.32 million rials to the dollar.

There are challenges in analyzing how Iran’s economy is faring during the war. The country has not released GDP data since 2024, and widespread internet blackouts have made national statistics inaccessible from outside the country.

The de facto closure of the Strait of Hormuz and subsequent U.S. blockade cut off most of Iran’s international trade, including oil exports.

More than 90% of annual trade passes through the Strait. Jason Tubey, deputy chief emerging markets economist at Oxford Economics, said in a note dated April 15 that new tensions amid the U.S. economic blockade could cost Iran 70% of its export earnings.

The war is also causing a collapse in domestic demand and imports, Tubey said, adding that although official data is lacking, March trade statistics from trading partners show a sharp decline in exports to Iran.

The Trump administration also threatened new sanctions against Chinese banks that facilitate trade with Iran.

Robin Brooks, a senior fellow at the Washington-based Brookings Institution think tank, said the combination of pressure from the blockade and the threat of sanctions on Chinese banks that support Iranian oil trade may be hurting Iran’s economy more severely than many expected.

“This cuts off one of Iran’s key lifelines and hastens the timing of Iran’s balance of payments hitting the wall,” Brooks added.

“The effectiveness of this blockade and the fear it creates in Iran will bring Iran back to the negotiating table in good faith,” Brooks said.

Iran sees the Strait of Hormuz as key to its economic recovery, and those in Washington hoping for Iran to relinquish its influence over the Strait as part of a peace deal will be disappointed, Jasmine El Gamal, founder and CEO of Avaris Strategies, told CNBC’s “Europe Early Edition” in March.

She said the Iranian government “continues to value this very much… because they know it is their key, their gateway to economic recovery.”

Amir Khanjani, non-resident senior fellow at the Atlantic Council, said that despite severe inflation and declining growth, Iran may not face a complete economic collapse.

He said Iran has been used to dealing with tough international sanctions for about 50 years and has put in place an energy trading system that circumvents U.S. sanctions.

“Iran’s economy could recover faster than most expected, as long as a peace deal is reached with the United States that lifts sanctions and takes Iran’s economy out of the ‘penalty box’ it has been stuck in for 40 years,” Handjani told CNBC.

Iranian economic officials recently reportedly warned President Masoud Pezeshkian that it could take more than a decade to rebuild the war-torn economy, local Iranian media reported, citing sources familiar with domestic deliberations.

Central bank governor Abdulnasser Hemmati also reportedly asked Pezechikian to take urgent measures to stabilize the economy, including restoring full internet access and pushing for a peace deal with the United States.

A key question, analysts say, is how quickly Iran can repair the damage to its energy and industrial infrastructure, which supports export revenues and employs much of the country’s population.

A wave of heavy U.S. and Israeli attacks has wreaked havoc on Iran’s energy infrastructure, and economic pressure is deepening as part of efforts to extract concessions from Iran at the negotiating table.

“Attacks on oil refineries, power plants, and related facilities represent the most serious economic wound from this conflict,” Handjani said.

Seth Krumrich, a retired U.S. Army colonel and vice president of security firm Global Guardian, said Iran was already running a budget deficit before the war, with infrastructure damage estimated at $200 billion to $270 billion.

“With an economy in ruins, basic social services failing, no alternative political and governmental options, no friends around the world to help them, and a brutally hot summer ahead, Iran is in the midst of a serious humanitarian disaster,” Krumlich told CNBC.

Lucila Bonilla, chief emerging markets economist at Oxford Economics, agreed that more challenges are ahead for Iran.

He said Iran’s neighbors alienated by infrastructure attacks are already looking for alternative routes around the Strait of Hormuz, but remaining trading partners such as Russia and China have shown little appetite to help Iran.

“We don’t know if there’s going to be a deal, we don’t know if there’s going to be a war, but what we do know is that Iran has a weaker currency and much higher inflation. They’re going to have a much larger budget deficit, and they’re probably going to have less leverage than they expected in this situation of changing routes to avoid[the Strait of Hormuz],” she told CNBC on Tuesday.

He added that “even under the most optimistic scenario” for a peace deal, the outlook “results in only prolonged weakness and hardship for the people rather than recovery.”