Iran’s economy is in freefall, with soaring inflation, a collapsing currency, and growing poverty pushing millions to the brink.
The crisis is only deepening since U.S. President Donald Trump reinstated his “maximum pressure” campaign, tightening sanctions and vowing to cripple Tehran’s economy.
Newsweek has reached out to Iran’s Foreign Ministry for comment via email.
Why It Matters
Prices for food, housing, and essentials have skyrocketed, making survival a daily struggle for many Iranians. Inflation is above 45 percent, and nearly half the population is now living in poverty, according to the Statistical Centre of Iran. As frustration grows, the Islamic republic’s leadership faces mounting pressure to respond.
What to Know
Under Trump’s orders, the U.S. has reimposed sanctions aimed at crippling Iran’s economy, and their effects are already being felt. As Iran grapples with the fallout, Trump has signaled a willingness to negotiate, even as he threatens further pressure over Tehran’s advancing nuclear program.
In an interview with Newsweek, Afshin Molavi, Senior Fellow at the Foreign Policy Institute at the Johns Hopkins University’s School of Advanced International Studies, said, “Iran’s economy is battered. It faces dire energy shortages, owing mainly to its own mismanagement and corruption, but also due to sanctions.”
Currency in Free Fall
Iran’s currency fell to a record low of 928,000 rials to $1 in aftermarket trading, a drop of more than 6 percent from Friday. This sharp devaluation has fueled inflation, wiping out savings and making imported goods unaffordable for many.
Housing Costs Are Out of Control
According to Iran’s central bank, rent in Tehran has surged 24-fold over the past 12 years, while real estate prices have skyrocketed more than 37 times. Wages, meanwhile, have increased only around 20 times. For many, affording even a modest apartment is now impossible, with rents in some areas exceeding an average worker’s entire monthly salary.
Oil Sanctions Bite Hard
Iran’s oil sector is the lifeblood of its economy, making Trump’s renewed “maximum pressure” policy a major threat. Last week, he signed a directive reinstating the strategy from his first term, vowing to cut Iran’s oil exports to zero.
With oil revenues accounting for nearly half of government income, the move deepens Tehran’s economic struggles.
“Iran’s oil revenues have been able to paper over many of the structural faults in the economy. Oil revenues account for some 40 percent of government revenues and an even larger share of hard currency earnings.” Molavi said.
While Trump has signaled a willingness to negotiate, he issued a stark warning: “They cannot have one thing—they cannot have a nuclear weapon. And if I believe they are pursuing one… it will be very unfortunate for them.”
What People Are Saying
Iranian President Masoud Pezeshkian said: “The current economic challenges are beyond the government’s immediate control, and we are exploring all possible avenues to mitigate the impact on our citizens.”
U.S. President Donald Trump warned: “Iran is very nervous. I think they’re scared. I think Iran would love to make a deal and I would love to make a deal with them without bombing them.”
Afshin Molavi, Senior Fellow Foreign Policy Institute told Newsweek: “This is a crisis mostly of its own making. Years of mismanagement, corruption and poor policy decisions have led to the massive underperformance of an economy that should be a major regional powerhouse.”
What Happens Next
With Iran’s economy continuing to spiral, the government is under increasing pressure to act. Whether through diplomacy, economic reforms, or further confrontation with the U.S., Tehran faces tough choices in the months ahead. Meanwhile, millions of Iranians are left wondering how much worse things can get.
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