Iran’s Economy Contracts More Than 10 Percent as War Damage and Blockade Leave Factories Burning Mazut

Economic Warfare & Trade Policy › Sanctions

Abadan catalytic facilities (file photo; historic view of Iran oil infrastructure). Photo: National Iranian Oil Company (NIOC), Wikimedia Commons, public domain.

Iran’s official statistics show an economy already buckling under war, naval blockade and damaged energy plants, even as authorities tell households and factories to prepare for another winter of gas rationing. Gross domestic product fell 10.1 percent year on year in the three months to June 20, according to the Statistical Center of Iran, figures first highlighted by Al Jazeera in September and revisited this week by The National as winter demand rises and cargo remains stranded abroad.

Key figures from the Statistical Center of Iran, The National and Iran International. Minimum wage ≈ $62 at Thursday’s Bonbast free-market rate.

The oil and gas sector drove the collapse. Its output dropped 26.4 percent over the same spring quarter. Industry and mining contracted 14.7 percent. Even excluding oil, GDP shrank 4.6 percent. Agriculture was the rare exception, growing 2.3 percent. Those numbers cover only the opening months of the US-Israeli campaign that began on February 28. Analysts and Iranian officials say the US naval blockade imposed later in the year will make later quarters worse.

By the numbers

Official Iranian data for the three months to June 20 show a broad contraction. Oil and gas fell more than twice as fast as the overall economy. Non-oil GDP still shrank 4.6 percent, so the hit is not confined to the energy sector. Agriculture’s 2.3 percent gain was the only major sector in positive territory. These are TBR calculations of relative depth from Statistical Center figures reported by Al Jazeera and The National: oil and gas contracted about 2.6 times as much as total GDP, and industry and mining about 1.5 times as much.

Cargo piles up, currency holds, prices do not

The blockade and disrupted shipping have left Iranian goods stuck far from home. Mohammad-Ali Kargascha, a board member of Iran’s International Transport Companies Association, told the state-run Mehr news agency !Unverified claim, Mehr (Iranian state media) that the backlog of Iranian containers in Pakistani ports rose from early estimates of 3,000 to 8,000 and then to about 18,000. Storage and related charges on some shipments have exceeded $25,000, approaching the value of the goods themselves, The National reported on November 4, citing his comments.

Importers and exporters trying to route cargo overland through Turkey face higher costs and delays. The Trade Promotion Organisation has claimed sharp rises in exports to Turkey and Oman in the first half of the Iranian year, but officials themselves frame those gains as a partial substitute for southern maritime trade, not a recovery.

On the free market, the rial was slightly firmer on Thursday. Bonbast, a widely watched open-market tracker, last updated at 13:10 UTC on November 5 listed the US dollar at 267,000 tomans to sell and 265,400 to buy — about 2.67 million rials — with the euro near 299,930 tomans and the pound near 359,520. The monthly minimum wage of about 166 million rials is roughly $62 at that rate. Point-to-point consumer inflation reached 88.7 percent in the Iranian month of Mehr, which ended in late October, according to Statistical Center data reported by Iran International.

A Tehran businessman who works in foreign trade told The National that exporters were bringing in less hard currency and that importers could secure fewer raw materials. “All these factors have come together to create a very inflationary environment for us,” he said.

The winter gas shortfall

Energy shortages threaten to deepen the industrial contraction. Attacks on four Iranian gas-processing facilities earlier in the war knocked about 230 million cubic metres of daily production capacity offline, according to figures cited by The National and repeated this week by National Iranian Gas Company chief Saeed Tavakoli. About 100 million cubic metres a day has been restored; roughly 130 million remains unavailable.

Tavakoli told a November 4 meeting with the Tehran Chamber of Commerce — covered by the state-run Tehran Times via the Oil Ministry outlet SHANA !Unverified claim, Tehran Times (Iranian state media) !Unverified claim, SHANA (Iranian state media) — that before the attacks Iran already faced a winter imbalance of 250 to 300 million cubic metres a day. Residential and commercial demand could exceed 600 million cubic metres a day in a hard freeze, he said. Eleven of Iran’s 31 provinces have been flagged for possible winter supply trouble, with industry told to prepare alternative fuels.

Hedayatollah Khademi, a former member of parliament’s Energy Commission, told the ILNA news agency that the country still faced a shortfall of around 400 million cubic metres a day and blamed years of neglect of shared fields. “It is painful that we are the world’s second-largest holder of gas reserves, yet in winter we have to hope that the weather does not turn cold,” he said, according to The National.

Cement producers are already paying the price. Ali-Akbar Alvandian, secretary of the Cement Industry Employers’ Association, said gas supplies to cement factories were cut from late October, forcing plants onto mazut, a heavily polluting fuel oil. Before the cut, the industry received five to six million cubic metres of gas a day against demand of about 28 million. Transporting mazut effectively doubled fuel costs, he said.

Acting Oil Minister Hamid Bovard told the same Chamber meeting that conditions were “not normal” and that the ministry was working around the clock to restore lost capacity. Those remarks are the government’s own account, carried by state media; independent verification of restored volumes remains limited.

Who pays while commanders decide

The economic pain lands on workers and small firms while security institutions retain decisive weight over whether the war continues. President Masoud Pezeshkian, a relative moderate, said this week that Supreme Leader Mojtaba Khamenei had granted his government “certain powers” over negotiations with Washington, Al Jazeera reported from Tehran. He did not detail the scope. Mohsen Rezaei, the former Revolutionary Guards commander who is now secretary of the Supreme National Security Council, has insisted that the United States must meet Iran’s seven conditions — including an end to the naval blockade, oil-sanctions relief and the release of frozen funds — before the Strait of Hormuz reopens.

Al Jazeera’s Maziar Motamedi wrote that the balance of power since Ali Khamenei’s death in the February strikes has shifted toward the Islamic Revolutionary Guard Corps and other security officials. IRGC chief Ahmad Vahidi has sat in Mojtaba Khamenei’s military briefings. When US Vice President JD Vance wrote to Tehran, the letter went to Rezaei, not the president. IRGC spokesman Hossein Mohebbi said in mid-October that attacks on ships during an earlier memorandum of understanding were coordinated with higher authorities, not rogue action.

Mark Pyruz, who monitors Iranian protests, recorded 30 demonstrations across 19 locations in the last week of October, largely over unpaid wages, pensions, benefits and fuel shortages, The National reported. The gatherings remained relatively small. They are a measure of strain, not yet of organised revolt.

Households describe the same squeeze in blunter terms. After Iran International asked followers whether they would pack wartime emergency kits, respondents said a basic bag cost 150 million to 300 million rials — often more than a month’s wages. “We buy yogurt in four installments,” one wrote. The replies are self-selected and unverified, but they match the Statistical Center’s inflation print.

Iran’s engineers, with help from Chinese and Russian suppliers, may repair much of the damaged infrastructure, Iran International’s energy analysis argued on November 4. Specialised technology, financing and protection from further strikes are another matter. US and Israeli planners have repeatedly put petrochemical and gas plants on target lists. Companies weighing long-term investment face a cycle of damage, partial repair and renewed risk.

For ordinary Iranians, the ledger is already clear. Official data show a double-digit economic contraction. Factories are burning dirtier fuel. Thousands of containers sit stranded in foreign ports. The rial’s modest firming this week does not restore purchasing power eroded by nearly 90 percent year-on-year inflation. And the institutions that decide whether the Strait stays closed — the Supreme Leader’s office, the SNSC and the Revolutionary Guards — remain insulated from the mazut bills and empty supermarket carts those decisions produce.

Sources

• The National, “War weighed on US midterms, but Iran’s economy is paying heavier price,” Nov. 4, 2026
• Al Jazeera, “How oil, gas losses have shrunk Iran’s GDP by 10 percent during war,” Sept. 21, 2026
• Al Jazeera, “Who determines Iran’s fighting and negotiating position amid US threats?,” Nov. 4, 2026
• Bonbast open-market rates, updated Nov. 5, 2026
• Tehran Times (state media, via SHANA), “Oil ministry, private sector meet to tackle winter gas supply,” Nov. 4, 2026
• Iran International, energy recovery analysis, Nov. 4, 2026
• Iran International, consumer inflation and minimum wage, Nov. 1, 2026
• Iran International, emergency-kit responses (self-selected; unverified individual claims), Nov. 3, 2026

Additional sources

• Khazar Energy summary of Statistical Center and IEA gas figures
• Iran International energy recovery analysis, Nov. 4, 2026
• The Boston Report: U.S. forces redirected 144 ships under Iran port blockade

Sourcing notes: Statistical Center GDP figures are official Iranian data reported by Al Jazeera and The National. Mehr and ILNA quotes reach this article through The National. Tehran Times/SHANA reflect the Oil Ministry and NIGC line and are labeled as state media. Iran International is Tier 2 and attributed in the text.