A Portrait of Iran’s Economy in Mehr 1404 (September–October 2025)

In Mehr 1404, Iran’s economy is in what the document describes as the gravest condition in its modern history. Over the preceding year, structural, political, and international pressures converged on an already weakened economy and made daily life harder for millions. Chronic inflation and falling purchasing power remain the principal problems. Point-to-point inflation reached roughly 40 percent at times, while staples such as bread, meat, and dairy saw steep price increases. Reports for Dey 1403 indicated that more than one-quarter of food items rose in price by over 50 percent. This trend has sharply reduced household resources and left a large part of the population unable to meet basic needs.

The rial’s continued loss of value over the past fifteen years is among the clearest signs of Iran’s structural crisis. Currency volatility and more expensive intermediate and consumer imports have weakened domestic production and increased import dependence. Negative or near-zero growth in many sectors—including a reported 7.3 percent fall in agricultural output—has deepened stagnation. Political uncertainty, extensive sanctions, and high investment risk have discouraged long-term domestic and foreign investment. The banking system faces accumulated debts and persistent balance-sheet imbalances; government and loss-making enterprises cannot repay their obligations, undermining public confidence. Capital has consequently moved toward gold, foreign currency, and property, reinforcing speculation and instability.

The document states that, alongside international sanctions, more than 80 percent of the population has fallen below the poverty line or is at risk of poverty. Inflation has imposed severe pressure on lower-income groups and the middle class and widened inequality. Environmental and energy crises add another dimension. Water scarcity, drought, and agricultural mismanagement have reduced domestic food output and increased import dependence. Repeated electricity cuts disrupt small and medium-sized businesses and production and distribution chains. The economy is therefore described not merely as unable to create prosperity, but as threatening the day-to-day survival of millions.

Recent Israeli attacks on energy facilities and infrastructure compounded these structural crises. The Tehran oil refinery, fuel depots, and other vital facilities were targeted, reducing domestic energy production and supply and temporarily lowering oil exports. Reports cited in the document claim that oil exports fell by as much as 94 percent during the war. The attacks also increased military spending and diverted scarce public resources from development and welfare to military equipment and reconstruction. The rial’s decline and exchange-rate volatility accelerated inflation, while the psychological impact pushed investors toward gold and foreign currency and away from production and long-term projects.

In this context, the activation of the ‘snapback mechanism’ is presented as another major shock. The return of multilateral UN Security Council sanctions would further restrict oil exports and access to international financial and banking channels. The document argues that this would deepen the budget deficit, inflation, and unemployment and make imports of essential goods and medicine more difficult. Domestic stagnation would intensify, investment would decline further, and informal and speculative activity would grow. These pressures would also increase social discontent and create conditions for civic and political protest.

As the protests of 1396, 1398, and 1401 demonstrated, inflation and falling purchasing power can become direct drivers of collective action. Livelihood pressures often first appear in labor, teacher, and pensioner protests but quickly acquire a political character. The weakening of the middle class—long a social buffer—has made protests more radical and reduced the possibility of accommodation between society and the state. Widespread hardship also broadens the social legitimacy of protest, including among those not physically present in the streets.

From a political-economy perspective, Iran’s crises are direct products of the Islamic Republic’s governing structure. Economic power concentrated in quasi-state and security institutions, systemic corruption, ineffective policy, constantly changing rules, and a confrontational foreign policy have diverted the country from sustainable development. The document argues that no durable economic solution is possible while this structure remains: the Islamic Republic is a cause of the crisis, not its remedy. Even during periods of higher oil revenue, a lack of transparency, weak accountability, and corruption reproduced the same failures.

Sepehr Azadi Iran holds that a revolutionary transition from the Islamic Republic is a prerequisite for genuine and durable reform. The post-transition response requires a comprehensive program built on three pillars: immediate stabilization, institutional reconstruction, and structural modernization. Stabilization includes central-bank independence, fiscal transparency, anti-inflation policy, gradual exchange-rate unification, and food and medicine security. Institutional reconstruction requires judicial reform, protection of property rights, anti-corruption measures, and a foreign policy based on national interests and de-escalation. Structural modernization should diversify Iran’s energy capacity, reduce oil dependence, develop knowledge-based industries, sustainable agriculture and renewable energy, and create an effective welfare system. Success depends on a transparent, accountable, consensus-based transitional administration able to win public trust and minimize the social cost of reform.