Iran’s Economy Crumbles Under War and Sanctions, But Its Leaders Bet Trump Will Fold First

Iran’s economy is reeling from relentless U.S. and Israeli attacks that have shuttered factories, stalled steel mills, and crippled petrochemical complexes—key pillars of the country’s non-oil exports. According to Iranian economist Hadi Kahalzadeh, airstrikes have damaged 20,000 factories, about 20% of the nation’s production units, including pharmaceutical, optics, aluminum, and cement manufacturers. The fallout is staggering: at least 1 million jobs lost directly to the war, with an estimated 10 to 12 million more at risk—half of Iran’s labor force.

The impact is felt everywhere. In Kashan, the carpet-making capital, 80% of manufacturers have halted operations, with exports and domestic sales nearly evaporated. Prices for everyday goods like chicken, beef, lamb, milk, and butter have surged by 50 to 75 percent amid supply chain disruptions and soaring raw material costs. Even industries not directly hit by strikes are suffering as construction grinds to a halt and steel prices double.

Iran’s economic troubles are compounded by a near-total internet shutdown and a U.S. blockade choking off imports and oil exports worth billions. The blockade targets the Strait of Hormuz, a vital global energy artery that Iran’s leaders have threatened to keep closed until sanctions and the war end. Their gamble: an economy hardened by decades of sanctions can outlast Trump’s pressure campaign.

This standoff unfolds against a backdrop of social unrest. Earlier protests sparked by inflation and economic hardship were brutally suppressed, but the risk of renewed uprisings looms as more Iranians face unemployment and rising costs. The government promises to bolster unemployment insurance, yet its social safety net is strained, relying heavily on revenues from the very industries now under attack.

Iran’s leadership is playing a high-stakes game of endurance, betting that Trump’s administration will blink first amid mounting economic and geopolitical pressures. But with millions of livelihoods on the line and the country’s industrial base in ruins, the cost of this gamble falls squarely on the Iranian people. Meanwhile, the Trump administration’s reckless escalation risks dragging the region—and the world—into deeper chaos to distract from its own domestic failures.