From surging inflation to supply chain disruption to industrial havoc, a crisis could be nearing its breaking point.
“We don’t know how long we can hold on.” That’s how Yashar, who works at a Tehran-based internet service company, characterizes the economic situation in Iran’s capital. Yashar, whose employer both maintains communications infrastructure and delivers direct services to customers, says:
The company’s economy has been collapsing for a long time. Staff salaries were already five months overdue before the war, and now with this war, it’s not even clear why we come to work. There’s no internet access, and no ability to maintain or develop infrastructure. As for wages and payments, everything is completely uncertain.
In economic terms, a crisis reaches the threshold of collapse when, in addition to high inflation, disruptions emerge in the banking system, salary and pension payments, and the distribution of essential goods and services. That is the point Iran now approaches.
The war with the United States and Israel has entered its sixth week, and its outcome remains uncertain. What is already unavoidable is the impact of inflation, which accelerates by the day.
For years, Iran’s economy has faced annual inflation in the 30–40 percent range. Over the past year, it leapt beyond that: official estimates put 12-month average inflation at 50.6 percent in Esfand 1404 (March 2026). And that understates the recent surge. According to the Statistical Center of Iran, point-to-point inflation, which compares prices in a single month to the same month a year earlier, reached 71.8 percent in March.
Meanwhile, daily bank withdrawal limits—which had been set at 150 million rials (15 million tomans) before the war—have dropped to 3 million tomans or less since the beginning of the armed conflict, and even that little, the equivalent of approximately 18 US dollars, is difficult to access. People can still transfer money digitally, but cash withdrawals are now severely restricted.
“Inflation above 50 percent is a clear sign of a chronic economic crisis and one of the preconditions for collapse—and this is now openly acknowledged even by official statistics,” says an economist based in Tehran, who requested anonymity for safety reasons.
But the reality is that other signs of collapse are also beginning to emerge. The government is still paying salaries and supplying basic goods, but it cannot conceal all crises. Banks have entered a serious crisis, withdrawals are heavily restricted, and production had already been facing major challenges for months. The war has effectively brought production to a halt.
Ongoing social instability—another hallmark of economic collapse—has intensified as the war has exacerbated political polarization, the economist says. For now, daily essentials remain available and crucial services are still operational. In the economist’s view, however, as the war lengthens, the government will need considerable luck to save the economy from falling apart.
Destroying factories matters—destroying market trust matters more
In a wartime economy, what disrupts production chains is not just physical shortages, but the shattering of expectations and the rise of hoarding.
Bahram, a Tehran property developer and construction manager, says the immediate violence of the war, the missile strikes and bombardment of the city, has not brought his projects to a halt. “Just yesterday, a building 300 meters from one of my sites was completely destroyed—but we keep working.”
On the other hand, he says, construction materials are becoming scarce, and vendors are unwilling to sell because they expect prices to rise sharply. Even goods already paid for are not being delivered.
Referring to a strike on Mobarakeh Steel’s massive complex in Isfahan—one of multiple US and Israeli attacks on industrial facilities—he says:
Yesterday the news said the plant had been hit. Today, you can’t find rebar in the market. No one is willing to sell something they know will soon become completely unavailable.
Attacks on infrastructure are not just about destroying factories—they destroy market trust, and this is where the real damage is unfolding.
According to Bahram, what is currently happening in the housing market is a sectoral shock, one that could factor into triggering a macroeconomic tailspin. As materials become scarce, construction costs rise, in turn increasing pressure on housing prices. Bahram says that those prices have risen by about 70 percent since September, a figure close to that calculated in a detailed report by Capital House on the “war freeze” in the housing market.
Now there is the looming threat of widespread infrastructure destruction and long-term power outages, a threat that itself undermines market trust. Even more than the physical damage inflicted by Israeli and American airstrikes, the crumbling of market trust fuels inflationary expectations, hoarding, and extreme stockpiling—ultimately creating a broader crisis of distrust with tangible effects on daily life.
One related, perhaps surprising, development is that in contrast to the prewar period, when the national currency was rapidly depreciating, exchange rates have shown little fluctuation over the past month.
A source within the banking network describes this as a result of a steep drop in effective demand:
When demand goes to zero, prices stabilize. But as soon as the war ends and the first demand returns to the currency market, prices will spike sharply. This is a normal and unavoidable post-suppression effect.
He explains that the drop in demand may stem from multiple factors such as reduced imports, the restrictions on individuals’ access to money, and other new government controls—but that, in any case, the stability is temporary.
A perilous outlook
Iran’s economy, already on a fragile foundation before the war, has so far managed to hold together amid the current crisis. However, a combination of simultaneous shocks—infrastructure degradation, supply disruptions, and declining market trust—has pushed the economy to a point where continued deterioration could lead to functional collapse in multiple sectors.
According to the economist who spoke with Resanegar, Tehran Bureau’s economic unit:
If the war continues, Iran must try to contain its intensity, keep export and import channels open, preserve access to oil revenues, and maintain the functioning of banks, payments, and essential supplies—food, medicine, fuel.
In the short term, he believes, Iran is unlikely to experience a sudden, explosive fracture. Instead, the wartime economy will make the country poorer, more closed, and more unstable, with sharply reduced liquidity. The more the current strains are prolonged, though, the more the outlook changes.
What is happening in Iran today is not yet collapse. But if present economic trends continue, let alone deepen, that grim threshold may well be crossed.