Latest news with #IranEconomy
The National
23-06-2025
- Business
- The National
War's effect on Iran's battered economy will be 'devastating', with strong signs of regime change
Iran's economy will face a hard hit from the war with Israel, as it continues to grapple with western sanctions, high inflation and currency devaluation, analysts say. Israel made a surprise attack on nuclear sites in Iran on June 13, claiming Tehran was close to developing a nuclear weapon. As the conflict dragged on with tit-for-tat attacks, the US entered it on Saturday, bombing three nuclear facilities in Iran. 'The impact of the continuing war on Iran's economy will be devastating, particularly because the economy has lost its resilience after 14 years of sanctions,' said Mahdi Ghodsi, an economist at The Vienna Institute for International Economic Studies. Residents have begun leaving cities such as Tehran, Tabriz and Isfahan, indicating that economic activity and employment have been 'severely paralysed across sectors', he said. Capital market reactions are likely to be negative with the stock market currently closed, said Mohammad Farzanegan, professor of Middle East economics at the Centre for Near and Middle Eastern Studies, Philipps-University Marburg in Germany. 'The market is marked by a high degree of uncertainty,' he said. 'The war has placed an additional burden on Iran's foreign trade, which was already strained by sanctions.' Iran's economy has suffered under the extraneous sanctions reimposed by Washington in 2018 after US President Donald Trump in his previous term removed the US from the Joint Comprehensive Plan of Action nuclear deal. The sanctions are yet to be lifted. The country is also on the Financial Action Task Force's blacklist. Iran's economic growth is forecast to flatline at 0.3 per cent in 2025, down from 3.5 per cent in 2024, according to the International Monetary Fund. It is forecast to expand 1.1 per cent next year, the fund said in April. The fund also expects Iran's inflation rate to rise to 43.3 per cent this year, from 32.6 per cent in 2024, before slightly easing to 42.5 per cent next year. Due to the lorry drivers' strikes and the Bandar Abbas explosion just before the Israeli attacks, transport may be the most affected sector, according to Mr Ghodsi. 'This disruption is causing severe supply chain bottlenecks and shortages of goods and resources across cities of all sizes,' he said. 'The prices of goods and commodities are likely to surge substantially due to these supply shocks, further accelerating inflation.' While the government has announced penalties for shopkeepers raising prices, such measures are unlikely to be effective, he added. 'Sanctions have weakened Iran's economy and eroded the middle class. Real incomes have declined due to inflation, leading to a higher incidence of poverty,' Mr Farzanegan said. He also said sanctions reduce Iran's military spending, which 'increases vulnerability to external aggression'. Iran's military spending fell by 10 per cent in real terms to $7.9 billion last year despite its involvement in regional conflicts and its support for regional proxies, according to the Stockholm International Peace Research Institute (Sipri). The impact of sanctions on Iran severely limited its capacity to increase spending, Sipri said in an April report. Meanwhile, oil revenue have also been affected as a result of disrupted economic activity. While the damage to energy infrastructure by Israeli attacks has not been significant, fear of bombardment has 'already driven workers away from the refineries, significantly hampering production', Mr Ghodsi said. 'Moreover, strikes have damaged parts of Iran's energy, electricity, and water infrastructure, which poses a serious risk to civilian life. Without basic access to energy, even food preparation becomes a challenge, a scenario that could escalate into a humanitarian catastrophe,' he added. Currency devaluation The Iranian rial, which has been devalued significantly in recent months, fell sharply after the first Israeli attack. 'Subsequently, the government imposed restrictive capital controls and supplied foreign currency to the market', which temporarily supported the rial, Mr Ghodsi said. The exchange rate on the parallel market was at about 92,250 rials to a dollar at 1.15pm UAE time on June 23, according to which gathers live data from Iranian exchanges. In April, Iran's currency fell below the psychologically important level of 1,039,000 rials to the US dollar after US President Donald Trump's administration pressed on with its 'maximum pressure' campaign against Tehran with a new round of sanctions. Further currency devaluation is expected, according to Mr Farzanegan. Mr Ghodsi agreed, adding that the capital controls on the stock exchange and banking sector have so far prevented a financial meltdown and bank runs. 'However, the increasing exodus to neighbouring countries indicates a capital flight in motion. Every time these controls are loosened, the rial nosedives, worsening instability, driving up import prices, and triggering economic shocks,' he said. 'Regime change on the cards' Mr Ghodsi said the indicators point towards a regime change in Iran. 'I believe the early stages of state failure are now emerging. The Islamic Republic is on a slippery slope,' he said. He cited the Weberian theory with four criteria 'indicative of state failure, all of which now apply to Iran'. They include loss of monopoly on the use of force, erosion of legitimate authority, inability to provide essential public services and inability to engage as a sovereign peer in the international system. 'Given the continuing retaliatory attacks and the involvement of the United States, we are witnessing clear indicators of regime change,' he said. According to Mr Farzanegan, even if Iran and its government withstand the aggressions, they will need to 'significantly revise their economic, political, social, and security agendas'. 'Whether Iran can resist aggressors (Israel and the US) depends not only on its economic conditions but also on factors like internal unity and the extent of rally-around-the-flag effects during invasion,' he said. Reforms will need to be undertaken. 'The immediate priority is to preserve Iran's territorial integrity and reduce the risk of a civil war instigated by external actors seeking to turn Iran into a failed state. Such a collapse would be the worst possible,' he added.
Yahoo
22-06-2025
- Business
- Yahoo
Strait of Hormuz saber-rattling ramps up following US attack. Whether the key waterway will close is less clear.
Iran's parliament pushed the nation to close the Strait of Hormuz, according to state media, but left the final decision to choke off the key waterway to Iran's Supreme National Security Council. Vice President JD Vance shot back Sunday that such an action "would be suicidal" for Iran as "their entire economy runs through the Strait of Hormuz." Yet the Islamic Republic appears to be a step closer to the unprecedented action that could spike prices around the world, with about 20% of global oil and gas flowing through the narrow passageway connecting the Persian Gulf to the rest of the globe. It was just one front — but perhaps one with the greatest economic consequences — after President Trump ordered an attack on three of Iran's nuclear sites and drew the US into the ongoing war. Some experts are skeptical Iran will ever follow through, as the country has threatened the strait multiple times over the years — but historically opted for less disruptive measures. In comments Saturday night, Trump described the move as a means to bring Iran to the negotiating table. But it immediately set off fears of additional violence and retaliation in the days ahead. For their part, Iranian leaders say any talks are on hold but haven't outlined exactly how they are going to respond. "The US is not diplomatic and only understands the language of force and threats," said Iranian Foreign Minister Abbas Araghchi, according to Mehr News, the country's semi-official news agency. Araqchi also reportedly avoided directly commenting on the strait, saying "a variety of options are available to Iran." The action also comes after Iranian General Mohsen Rezaei, an Iranian leader who has a seat on the decision making Supreme National Security Council, reportedly said on state television hours before the attack that the country would move to close the strait if Trump entered the war. Economists will be closely watching the strait because of global economic repercussions that would almost surely follow any disruptions there. Analysts at JPMorgan Chase (JPM) have called a blockage there a "worst-case scenario" and suggested the result could be global oil prices reaching $120 a barrel and pushing inflation in the US to 5%. But as Bloomberg energy columnist Javier Blas re-emphasized over the weekend, it benefits Iran to "use low-ranking officials to talk about closing Hormuz," because it sows instability. But it would actually damage Iran to follow through. Indeed, closing the strait would be felt in Iran's own oil sector and cut off a key revenue source for the country's leaders. Iran uses the waterway for its own energy exports, which totaled over 1.3 million barrels of oil a day 2023 according to CEIC. As Noam Raydan, who studies energy and maritime risks at the Washington Institute for Near East Policy, put it to Yahoo Finance last week before the attacks: "If its oil production and terminals are badly damaged, we can then seriously consider the possibility of Tehran shutting the strait." So far, that doesn't appear to be the case, with Israel striking one oil refinery in Tehran but so far apparently leaving the country's oil infrastructure largely in place. Most Iranian oil flows to China but the closing the Strait of Hormuz would jeopardize a wider array of oil and natural gas sources with Saudi Arabia, Kuwait, Iraq and others using that waterway. The overall landscape has led Trump administration to express tempered confidence Sunday that the Strait of Hormuz option is one that won't be taken. "That would be suicidal," Vance said Sunday on NBC of Iran taking that step. "If they want to destroy their own economy and cause disruptions in the world, I think that would be their decision," he acknowledged "but why would they do that? I don't think it makes any sense." Secretary of State Marco Rubio added on Fox News that Iran closing the strait would be "another terrible we retain options to deal with that." Ben Werschkul is a Washington correspondent for Yahoo Finance. Click here for political news related to business and money policies that will shape tomorrow's stock prices Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-06-2025
- Business
- Yahoo
Strait of Hormuz saber-rattling ramps up following US attack. Whether the key waterway will close is less clear.
Iran's parliament pushed the nation to close the Strait of Hormuz, according to state media, but left the final decision to choke off the key waterway to Iran's Supreme National Security Council. Vice President JD Vance shot back Sunday that such an action "would be suicidal" for Iran as "their entire economy runs through the Strait of Hormuz." Yet the Islamic Republic appears to be a step closer to the unprecedented action that could spike prices around the world, with about 20% of global oil and gas flowing through the narrow passageway connecting the Persian Gulf to the rest of the globe. It was just one front — but perhaps one with the greatest economic consequences — after President Trump ordered an attack on three of Iran's nuclear sites and drew the US into the ongoing war. Some experts are skeptical Iran will ever follow through, as the country has threatened the strait multiple times over the years — but historically opted for less disruptive measures. In comments Sunday night, Trump described the move as a means to bring Iran to the negotiating table. But it immediately set off fears of additional violence and retaliation in the days ahead. For their part, Iranian leaders say any talks are on hold but haven't outlined exactly how they are going to respond. "The US is not diplomatic and only understands the language of force and threats," said Iranian Foreign Minister Abbas Araghchi, according to Mehr News, the country's semi-official news agency. Araqchi also reportedly avoided directly commenting on the strait, saying "a variety of options are available to Iran." The action also comes after Iranian General Mohsen Rezaei, an Iranian leader who has a seat on the decision making Supreme National Security Council, reportedly said on state television hours before the attack that the country would move to close the strait if Trump entered the war. Economists will be closely watching the strait because of global economic repercussions that would almost surely follow any disruptions there. Analysts at JPMorgan Chase (JPM) have called a blockage there a "worst-case scenario" and suggested the result could be global oil prices reaching $120 a barrel and pushing inflation in the US to 5%. But as Bloomberg energy columnist Javier Blas re-emphasized over the weekend, it benefits Iran to "use low-ranking officials to talk about closing Hormuz," because it sows instability. But it would actually damage Iran to follow through. Indeed, closing the strait would be felt in Iran's own oil sector and cut off a key revenue source for the country's leaders. Iran uses the waterway for its own energy exports, which totaled over 1.3 million barrels of oil a day 2023 according to CEIC. As Noam Raydan, who studies energy and maritime risks at the Washington Institute for Near East Policy, put it to Yahoo Finance last week before the attacks: "If its oil production and terminals are badly damaged, we can then seriously consider the possibility of Tehran shutting the strait." So far, that doesn't appear to be the case, with Israel striking one oil refinery in Tehran but so far apparently leaving the country's oil infrastructure largely in place. Most Iranian oil flows to China but the closing the Strait of Hormuz would jeopardize a wider array of oil and natural gas sources with Saudi Arabia, Kuwait, Iraq and others using that waterway. The overall landscape has led Trump administration to express tempered confidence Sunday that the Strait of Hormuz option is one that won't be taken. "That would be suicidal," Vance said Sunday on NBC of Iran taking that step. "If they want to destroy their own economy and cause disruptions in the world, I think that would be their decision," he acknowledged "but why would they do that? I don't think it makes any sense." Secretary of State Marco Rubio added on Fox News that Iran closing the strait would be "another terrible we retain options to deal with that." Ben Werschkul is a Washington correspondent for Yahoo Finance. Click here for political news related to business and money policies that will shape tomorrow's stock prices Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Al Jazeera
25-05-2025
- Business
- Al Jazeera
How desperate is Iran for a deal with the US?
With a battered economy and a restless population, Iran is as desperate as the United States to come together, Johns Hopkins University Professor Vali Nasr argues. Nasr told host Steve Clemons that US President Donald Trump's administration is eager to reach an arms control deal with Iran, and Iran is eager to grow economically. 'Both of them have arrived, after 40 some years, at a juncture where they need to change the direction of their relationship,' Nasr said. Join the conversation on Nasr's latest book, Iran's Grand Strategy: A Political History, which explains how Iran's anti-Americanism 'is not ideological or theological'.
Washington Post
24-05-2025
- Business
- Washington Post
On streets of Tehran, Iranians describe daily struggles and cautious hopes
TEHRAN — For many in Iran's capital city, years of sanctions, mismanagement and corruption have meant learning to make do with less and putting dreams on hold. In the past year alone, the Iranian rial has lost half its value. Companies, cut off from international banking systems by Western sanctions, struggle to raise capital or attract customers. Inflation is so high, many report that grocery store prices seem to change almost daily. Washington Post interviews with people across Tehran offered a rare window into the lives and economic struggles of the country's urban middle class — mired in a status quo that feels stagnant but stable, at least for now. Against this backdrop, Iranian leaders entered into complex and delicate negotiations with the United States last month, seeking sanctions relief in exchange for limits on the country's nuclear program. A fifth round of talks in Rome on Friday made 'some but not conclusive progress,' according to the mediator, Omani Foreign Minister Badr al-Busaidi. The two sides remain at an impasse over the central issue, with U.S. officials suggesting they will push for zero enrichment of nuclear material and Iran insisting such a position would render a deal impossible. Some have interpreted the Iranian government's decision to engage as a reflection of weakness. Officials, analysts and ordinary citizens in Iran paint a more nuanced picture — of a country hungry for change but far from the breaking point. 'It is difficult, but we have found a way to manage,' said Mariam, 37, sitting with her childhood friend Sarah in a manicured park in central Tehran while their children played nearby. Both women said they were generally supportive of the system in Iran, even if 'some politicians only care about filling their pockets,' Sarah quipped. Like others in this story, they spoke on the condition that they be identified by their first names for fear of repercussions from authorities. Both women are middle class. They own the homes they live in and were able to stop working when they had children, supported by their husbands' wages. They said they've adjusted to inflation and other economic pressures with frugality: The kids get fewer toys and new clothes, and family vacations are rare. Although Mariam is comfortable with the new normal, she said there's 'no way' the country can endure sanctions indefinitely. 'This younger generation is different from our generation,' she said with a slight smile. 'My husband worked as a teenager. But we tell our own children to study, not to work; they're less resilient than us.' When her son was out of earshot, she lovingly complained to her friend that he was gaining weight from eating too much ice cream. Esfandyar Batmanghelidj, the chief executive of the Bourse & Bazaar Foundation, a London-based think tank that tracks Iran's economy, said household income data has shown structural adjustment — even improvement — since last year. 'There has been this kind of adaptation to the new reality,' he said, referring to the sanctions reimposed in 2018 during President Donald Trump's first term, followed soon after by the coronavirus pandemic. 'It seems like the country is coming out of the darkest period of its economic situation.' Although Iran still has 'profound' challenges related to inefficiencies and mismanagement — illustrated most recently by widespread power outages — the data does not suggest a country 'on the precipice of economic collapse,' Batmanghelidj said. Since returning to office, Trump has tightened sanctions on Iran, largely targeting individuals and entities involved in exporting oil to China. But the rial has rebounded slightly since the resumption of talks with the United States. Even if Iran isn't experiencing a runaway economic crisis, its leaders still have significant incentives to pursue sanctions relief, according to Batmanghelidj. Looking across the Persian Gulf at the glittering cities of the United Arab Emirates and Saudi Arabia, 'they are getting the sense that they're being left behind.' Iranian officials have repeatedly made the argument that Washington's maximum pressure campaign has failed to break the country. 'They have accepted that Iran is powerful in certain areas, and for this reason, they have sat down at the negotiating table with us,' said former Iranian atomic agency chief Fereydoon Abbasi in an interview with an Iranian news outlet. 'If we were a weak country, they would definitely attack us.' Inside Iran, even those who support the talks speak about them with a jaded weariness, a contrast with the buoyant national mood in the lead-up to the first nuclear deal negotiated with the Obama administration. When the accord was signed in 2015, people in Tehran danced in the streets. Some attribute the lack of excitement this time to a general disillusionment with the Iranian regime, which hardened for many after security forces violently put down nationwide protests in 2023. Others have a dim view of Trump, who withdrew from the Obama-era nuclear deal and in 2020 ordered the killing of Qasem Soleimani, then the country's most celebrated military commander. 'After Trump killed Soleimani, of course there is no trust,' said a woman shopping on the edge of a northern Tehran bazaar. 'Our martyrs, they are very important to us,' she said, pausing as she searched for words. 'We really love them.' Across Tehran, there are portraits commemorating fallen political and military leaders. Soleimani's face is still among the most prominent, adorning government buildings, residential apartment blocks and highway overpasses. Like other supporters of the regime, the woman said she supports talks with the United States but isn't getting her hopes up. 'Let's see what happens,' she said, shrugging. Many Iranians are less forgiving of their country's leadership, even in the relative bubble of Tehran, which receives more resources than other parts of the country. At an upscale mall lined with gold shops, boutiques of imported clothing and knockoff designer shoes, 44-year-old Nirvana said the poor economy had forced her to rethink her future. 'I used to want to get married, but now I see my friends and how hard it is for them,' she said. Monthly rents in Tehran have skyrocketed, and people's salaries aren't keeping up. 'It's better to stay at home with your parents.' At a nearby shop owned by Sahriar, 46, and his wife, Bahar, 43, the couple said they decided not to have children, citing the lack of economic opportunity. 'Children don't have a future here,' said Sahriar. If things don't change soon, he said, it's probably just a matter of months before he'll no longer be able to make rent on his store. Though the city's shopping malls look busy, most people just come to walk, he said; very few buy anything. The lack of purchasing power was also apparent in the carpet section of Tehran's grand bazaar. Shops were stocked with inventory from floor to ceiling, but customers were hard to find. 'My wife is a teacher. It used to be that on a teacher's salary, you could save to buy a nice carpet, but now no one can save,' said Mustafa, 41, who works in the bazaar as a kind of personal shopper, guiding potential buyers to the right shops. 'All our money goes to the essentials, nothing extra,' he said. Mustafa wonders if Iran's leaders are unaware of the situation for people like him, or if they're just indifferent. He's become so frustrated, he said, that he hopes the nuclear talks will fail and hasten the fall of the regime. 'I hope the government is overthrown,' said Mustafa, acknowledging that such a scenario would probably be chaotic and dangerous. 'Everything has a price. I'm ready to be destroyed if it means that future generations will be happy,' he said.
