In this context, the Islamic Republic is said to have intensified pressure by blocking the Strait of Hormuz, a narrow maritime passage through which a significant share of global oil trade flows, and whose partial or full closure constitutes a major destabilising lever for energy markets.
In response, US President Donald Trump is reported to have ordered a blockade of ports used for Iranian oil exports to China, the main outlet for Iranian crude. This decision would be part of a logic of progressive suffocation of Iran’s external resources, directly targeting its ability to convert energy exports into foreign currency.
Iran’s economy, already weakened by years of international sanctions, now appears to be severely affected. According to preliminary estimates, more than 125,000 civilian and residential buildings have been damaged, as well as 339 healthcare facilities, 32 universities and 857 schools. Around 20,000 industrial units are also reported to have been affected or destroyed.
An initial estimate, presented as provisional by Iranian authorities, puts the damage at around 270 billion dollars. These estimates, by nature evolving, do not yet fully take into account the indirect effects of the conflict on productivity and investment flows.
MILITARY AND ECONOMIC TARGETS
According to several analyses, US and Israeli strikes are believed to have targeted both economic infrastructure and military objectives, in a logic of multidimensional pressure.
On the military side, targets are said to have included armed forces bases, logistics sites, command and control centres, as well as air defence systems, essential elements of the state’s operational sovereignty. Facilities linked to ballistic capabilities and conventional weapons stockpiles are also reported to have been hit, in a perspective of neutralising Iran’s retaliatory capacity.
On the economic side, strikes are reported to have hit structural sectors of Iran’s productive apparatus, including petrochemical complexes, oil refineries, electricity and gas infrastructure supplying heavy industry, as well as major steel production sites, historical pillars of the country’s industrialisation. Transport and industrial logistics infrastructure are also said to have been disrupted, weakening the flow of inputs and the continuity of production chains.
Overall, this outlines a strategy that is not limited to military weakening, but also targets the state’s capacity to produce, employ and redistribute, with cascading effects likely to affect social cohesion over the long term.
EMPLOYMENT SHOCK AND ECONOMIC CONTRACTION
Iranian economist Hadi Kahalzadeh, a researcher at the Center for Global Development and Sustainability at Brandeis University, estimates that 3 to 4 million jobs could be lost or at risk, while unofficial Iranian estimates reportedly mention around 2 million.
He also anticipates an economic contraction of 8 percent to 10 percent in 2026, a level generally associated with prolonged wartime situations rather than a simple cyclical recession.
Key industrial sectors, particularly steel, are said to have suffered significant damage. The Mobarakeh Steel plant in Isfahan, the country’s main producer of hot rolled coils, is reported to have been heavily affected, as well as other major players such as Khouzestan Steel, Yazd Alloy Steel and Kavir Steel.
In petrochemicals, facilities such as Mobin, Fajr and Damavand, which supply electricity, gas and industrial fluids to surrounding complexes, are reported to have been hit, causing cascading disruptions across the entire production chain.
These industries represent a significant share of non oil export revenues, estimated at around 15 billion dollars per year, thus acting as a partial buffer against sanctions.
ECONOMIC FRAGILITY AND SOCIAL RISK
In the short term, Iran is believed to retain certain resilience mechanisms, including an administrative apparatus accustomed to sanctions, an extensive informal economy and rationing systems. These structures are more effective at containing immediate disruptions than at preventing a gradual deterioration of economic balances.
According to Hadi Kahalzadeh, financing unemployment support and basic food subsidies for one year would require 40 percent to 50 percent of the public budget, which is already structurally in deficit.
He estimates that continued conflict, or even a ceasefire without sanctions relief, would prolong supply chain disruptions, accelerate business closures and fuel social discontent.
He also stresses that the economic and social effects of the conflict could persist well beyond the end of hostilities, due to inflation, destruction of productive capital and erosion of household resilience.
FINANCIAL INSTABILITY AND INFLATION RISKS
Several Iranian economic officials are also expressing growing concern.
Ahmad Mokhtar, vice president of the industrial commission of the Iranian Chamber of Commerce, warns that continued conflict or temporary ceasefires would maintain strong security uncertainty and prolonged sanctions pressure, pushing the economy into a more critical phase.
He points to a risk of a monetary shock, understood as a rapid and disorderly depreciation of the national currency, likely to fuel inflationary pressures and capital flight phenomena, as well as shortages of raw materials and a contraction of imports.
He adds that the budget deficit could widen further, while inflation could exceed previous estimates of 40 percent to 50 percent.
DIPLOMATIC CONSTRAINTS AND ESCALATION RISKS
Tehran continues to demand that any negotiation include the lifting of international sanctions. However, several analysts believe that full economic reconstruction could take several years, or even decades.
According to a Western diplomatic source, Iran could still generate around 2 billion dollars per month through non hydrocarbon exports, allowing it to temporarily sustain its economic and military effort, without guaranteeing macroeconomic stability.
Former US diplomat Alan Eyre, involved in the 2015 nuclear agreement negotiations, believes that an effective naval blockade of Iranian ports would significantly reduce the country’s revenues and accelerate the contraction of its energy production.
However, he stresses that economic pressure alone is generally insufficient to alter Tehran’s strategic positions, which are largely driven by security considerations and regime survival.
He finally warns that any further escalation could lead to Iranian retaliation targeting energy infrastructure in the Gulf or strategic maritime routes such as the Bab el Mandeb Strait, with potentially systemic consequences for global energy markets.
*Author is a former member of the UN senior staff