These days, you can almost instantly notice the contradictions when you stroll through any sizable bazaar in Tehran. Most of the shelves are still stocked. rice, cooking oil, and less expensive meat cuts. In the same way that Iranians have been complaining about prices for forty years, people are buying, haggling, and complaining about prices. However, something seems strange. More frequently, the lighting flickers. Shopkeepers refresh exchange-rate apps between customers by keeping their phones face up on the counter. When asked how business was going, one vendor simply shrugged and said that the war had only subsided.
In some respects, that shrug sums up what a former head of the World Bank recently called an economy on life support. On paper, Iran is not collapsing, which makes the phrase striking. The oil continues to flow. Money is still coming in. The state’s finances have not run out. Subsidies and emergency imports can’t really conceal the grinding down of the machinery that actually makes things, employs people, and pays taxes beneath that surface.
A portion of it is revealed by the numbers. Strangely, India’s covert return as a buyer under a temporary U.S. waiver has contributed to oil revenues, which are currently close to $150 million per day. Additionally, Tehran has made the Strait of Hormuz resemble a toll booth, charging ships up to two million dollars for what it claims is safe passage. It’s a smart short-term strategy. Additionally, it’s the type of move that ages poorly. The UAE pipeline intended to avoid Hormuz, which is already almost half constructed, serves as a reminder that consumers eventually find other doors. Countries don’t forget being shaken down at sea.
Economists observing this believe that Iran is turning strategic leverage into money more quickly than it can rebuild what the war is destroying. Khuzestan and Isfahan’s steel facilities have been damaged. Due to gas shortages and damaged supply lines, the nation’s petrochemical industry, which generated between thirteen and seventeen billion dollars in exports last year, is operating far below capacity. Aluminum is in short supply in the automotive industry. Because no one wants to start something they might not be able to finish, construction is slowing down.
Investors appear to think—or at least hope—that the ceasefire will last and the Strait will reopen without incident. Even in the best scenario, it will take months for things to improve, according to Ajay Banga, the current president of the World Bank. He is discreetly putting together what he refers to as a “war chest,” which could total up to $100 billion over the course of fifteen months and be more than the bank used during the pandemic. You don’t prepare for a speedy recovery in that way.
The policy response inside Iran has a command and control flavor that is well-known in Tehran. In the first month alone, customs released about 220 million dollars worth of medications and medical supplies. Small businesses have received subsidized loans to help them stay in business. According to NetBlocks, the internet has been blacked out or throttled for extended periods of time, costing about $37 million every day in lost activity. In essence, it is a time-buying emergency model. Nobody quite says what it’s time for.
Approximately 650,000 jobs were lost during the most recent conflict, the so-called 12-Day War of June 2025. This one is longer, wider, and more damaging. Unemployment could reach the millions, according to analysts close to the situation. This is the kind of pressure that has historically caused even tightly controlled economies to collapse. The rial has quickly lost ground. The collapse of Bank Ayandeh in December of last year demonstrated the depletion of the banking system’s reserves.
It’s difficult to ignore the similarities to Iraq during the sanctions era in the 1990s, when oil money supported a regime while the country’s productive economy subtly collapsed. Iran has not yet arrived. However, the trajectory appears eerily similar. Even if Tehran survives the military campaign, it might end up as a nation with broken factories, full coffers, and a weaker, more worn-out populace. That is not a collapse. It’s something slower and potentially worse in the long run.