A severe fuel shortage, a crippled banking sector and rapidly accelerating inflation have pushed Iran’s economy deeper into crisis as the war drags on, exposing the country’s growing financial fragility..
With fuel rationing tightening, banks unable to provide basic services, and many Iranians struggling to access wages or savings, the economic strain already caused by years of sanctions is now compounded and intensified by the conflict.
Economic researcher Samir Raouf told MBN that Iran’s economy has effectively become a wartime economy.
“All of the state’s resources are now devoted to the war effort,” he said. “That has created enormous problems for economic growth and the provision of public services because budget allocations are being directed to military operations, causing severe disruptions within the banking system.”
A U.S. naval blockade of Iran threatens to erase roughly $435 million in economic activity each day and could force the country’s oil fields to shut down within weeks, according to a report by the Foundation for Defense of Democracies.
Fuel Shortages
Iran’s gasoline shortage worsened after government spokeswoman Fatemeh Mohajerani announced on July 28 that the monthly subsidized gasoline allowance would be reduced from 70 liters to 50 liters per person.
It was the second reduction in subsidized fuel allocations this year. About a month after the war began, the monthly quota had already been cut from 100 liters to 70 liters per person.
Mohajerani justified the latest reduction, saying it was necessary because the war had severely damaged Iran’s domestic refining capacity. She said the country currently produces about 100 million liters of gasoline a day and must import the remainder using scarce foreign currency reserves that are also needed to pay for essential goods, medicines, and industrial supplies.
She said changes to gasoline pricing or the reintroduction of a quota system had become unavoidable, adding that the government had to adopt new measures to manage consumption and restore balance to the fuel market.
“I’ve been waiting since early morning to fill my car,” Mehdi, an Iranian schoolteacher, told MBN. “The line moves very slowly, and I’ll have to wait even if it gets dark because I can’t afford commercially sold fuel outside government stations. It’s far too expensive for my income.”
Mehdi said he has not received his salary for more than three months because of the country’s deep financial crisis.
Yet his situation may be less dire than that of Loqman, a municipal employee in Ilam, western Iran, who told MBN he has gone unpaid for more than seven months and has repeatedly borrowed from relatives and friends just to meet his family’s basic needs.
A Banking Crisis
Alongside the fuel shortage, Iran has endured more than two months of persistent banking disruptions, with banks ceasing normal operations and customers unable to access their accounts.
The disruptions come as the country continues to struggle with a longstanding cash shortage that has pushed consumers to rely heavily on electronic payment cards for everyday transactions.
But the banking crisis has rendered many of those cards unusable, leaving Iranians without cash unable to purchase daily necessities.
“My bank card worked until June, but then it suddenly stopped without any warning,” Iranian citizen Ronak Paniyeh told MBN. “When I went to the bank, they told me they were dealing with a technical problem and that it would be fixed within two weeks. More than a month has passed, and it still doesn’t work.”
Although Iranian authorities have accused Israel in recent months of carrying out cyberattacks against the country’s banking sector, the core banking systems used by Iranian banks and the company that provides their services operate on Iran’s National Information Network, a government-run domestic internet system that is isolated from the global internet.
Iranian activists who spoke to MBN said the attacks on the banking system originated from within Iran.
Behzad Akbari, chief executive of Iran’s Telecommunications Infrastructure Company, told the state news agency IRNA that “the source of the cyberattacks targeting the country’s banking network is domestic.” He cited statistics showing that nearly 350,000 cybersecurity incidents are recorded each day from within Iran’s local network.
Inflation Plagues Iran’s Economy
Even before the conflict, Iran was under heavy economic pressure from sanctions. Inflation exceeded 50 percent in 2025, while the Iranian rial lost about 60 percent of its value in the months following the U.S. military operation in July last year, according to data from the International Monetary Fund.
In April, after military operations that began in late February, the IMF projected that Iran’s economy would contract by 6.1 percent in 2026.
Some forecasts suggest inflation could climb as high as 70 percent this year.
After Tehran closed the Strait of Hormuz, U.S. President Donald Trump imposed a naval blockade intended to prevent Iran from importing and exporting goods, depriving the country of a significant share of its energy revenues and limiting its access to U.S. dollars needed to import essential supplies.
On his Truth Social platform, Trump recently posted a chart showing a sharp decline in the value of the Iranian rial since January 2025, when he took office. The chart’s headline said he was “destroying Iran’s currency” and described Iran as suffering from “severe inflation.”
Farzin Karbasi, an Iranian Kurdish opposition political analyst based in Iraq’s Kurdistan Region, said Iran’s banking sector has become deeply dysfunctional after decades of what he described as flawed financial policies and chronic mismanagement.
“Iran’s economy is now completely paralyzed and on the verge of a major collapse,” Karbasi told MBN. “The government is printing money simply to pay public-sector salaries. The country no longer has any gold reserves because the ruling establishment has sold them off over the past several years. Meanwhile, the Revolutionary Guards’ grip on the economy has only deepened the crisis. Oil revenues and other state income all end up in the Guards’ coffers.”
Speaking at Iran’s 33rd Conference on Monetary and Banking Policies in June, President Masoud Pezeshkian acknowledged the country’s worsening economic conditions. “Why do people in Iran wake up every day only to discover that their purchasing power has fallen?” Pezeshkian said. “There are hundreds of ways to overcome the economic impasse.”
Addressing conference participants, he added: “We, together with you, are the policymakers and the providers of credit guarantees for the people. We take their money, and when we return it, it has already lost its previous value.”
Adapted and translated from the original Arabic.
