Iran’s economy suffered a severe blow in the first quarter of the Persian calendar, as the country’s GDP contracted by 10.1% year-on-year between late March and late June. The decline came during a period when the country was at war with the United States and Israel, while oil exports, a key pillar of the Iranian economy, were also coming under heavy pressure.

According to data from Iran’s Statistical Center, Gross Domestic Product fell by 10.1% compared with a year earlier, with the calculation including the oil sector. The period corresponds to the first quarter of the Persian calendar.

The development reflects the extent of the pressure being exerted on an economy that depends heavily on hydrocarbon exports and found itself facing both military operations and tighter restrictions on the movement of Iranian oil.

The War and the Blow to Oil Exports

The conflict began on February 28, with US and Israeli strikes against Iran. Weeks of bombing and Iranian retaliation followed, before a ceasefire came into effect in April.

In mid-June, Tehran and Washington reached an agreement in principle that was expected to form the basis for ending the conflict. However, hostilities resumed, with the two sides accusing each other of violating the terms of the agreement.

The Strait of Hormuz is now at the center of the confrontation. Before the war, roughly one-fifth of global oil and liquefied natural gas shipments passed through the strait. Traffic in the area remains significantly restricted compared with pre-war levels.

The United States has reinstated a blockade on Iranian oil exports, drastically restricting one of Tehran’s main sources of foreign currency. According to data cited by Reuters, Iranian crude loadings fell from around 2 million barrels per day in March to just 220,000–255,000 barrels per day in August.

Iranian Parliament Speaker and chief negotiator Mohammad Bagher Ghalibaf had said that during the previous period of the blockade, the country was unable to export even “a single barrel of oil.”

Annual Inflation at 69.9%

The war has worsened an economic situation that was already heavily strained by international sanctions, high inflation and the continued depreciation of the rial.

Average annual inflation over a 12-month period reached 69.9% in August, according to official data from Iran’s Statistical Center. Compared with the same month a year earlier, prices were up 89%, while food price increases were even higher.

The continued rise in prices is rapidly eroding Iranians’ purchasing power, while the national currency continues to depreciate.

On the black market, the rial had already surpassed 2.2 million per dollar in early September, compared with around one million a year earlier.

IMF Sees 5.4% Recession in 2026

The outlook for the year as a whole remains negative. The International Monetary Fund forecasts that Iran’s real GDP will contract by 5.4% in 2026, according to estimates included in the July update to its World Economic Outlook.

This picture indicates that the effects of the war, restrictions on oil exports and prolonged economic isolation have now filtered more forcefully into the real economy, increasing pressure on both public finances and household incomes.