Iran’s GDP plummets by more than 10%, with repercussions spreading to the global economy.

The prolonged conflict is having increasingly evident consequences for the Iranian economy , which is already under pressure from sanctions, high inflation, and a weakening currency.

As conflict disrupts energy, trade, and transportation, these difficulties continue to mount for an economy heavily reliant on oil exports.

Iran’s GDP fell by more than 10% in three months.

On September 20, Iran’s Statistics Center announced that the country’s GDP for the period from the end of March to June decreased by 10.1% compared to the same period last year. According to the Iranian calendar, this is the first quarter of the fiscal year. Excluding oil, GDP still decreased by 4.6%, according to First Post .

Iran’s economy began to weaken after the outbreak of fighting in the Middle East in late February. US and Israeli airstrikes prompted Tehran to retaliate by blockading the Strait of Hormuz, a vital global oil shipping route, which drove energy prices up sharply. The conflict then spread to other areas of the Middle East, further straining Iran’s trade and shipping activities.

The oil and gas sector was the hardest hit, with production and related activities falling by 26.4% in the first quarter compared to the same period last year. Industry and mining also declined by nearly 15%.

The services sector, which contributes a large proportion to the Iranian economy, declined by 4.8%. Conversely, agriculture was a rare bright spot, growing by 2.3% during the same period.

Iran’s economy contracted sharply in the early months of the conflict. Photo: Reuters.

Oil is of particular importance to Iran, as energy exports are a key source of foreign exchange revenue. According to Reuters , the amount of Iranian crude oil loaded onto ships plummeted from around 2 million barrels per day in March to 220,000-255,000 barrels per day in August. Shipping was severely impacted after the US Navy blockaded Iranian ports, disrupting shipping routes through the Strait of Hormuz.

The Iranian Statistics Center only publishes GDP figures without identifying the direct causes of the economic downturn. However, the period covered coincides with the early months of the conflict. Since the outbreak of hostilities, Iran’s energy, trade, and transportation sectors have all been significantly impacted.

Pressure on the Iranian economy had already been present before the conflict. The country has faced high inflation and a depreciating rial for years amid international sanctions. The IMF forecasts that Iran’s inflation could reach nearly 70% by the end of this year.

The rial also continued to weaken. Last month, its exchange rate against the USD fell to a new record low, with more than 2 million rials needed to exchange for 1 USD , further increasing pressure on prices and consumer purchasing power.

The impact doesn’t stop at Iran.

Iran’s economic downturn is occurring against a backdrop of conflict that is putting increasing pressure on global energy markets. The Strait of Hormuz, a vital energy shipping route connecting the Persian Gulf to world markets, continues to operate below normal levels.

According to data cited by Reuters from Kpler, only 17 cargo ships passed through Hormuz over the weekend, down from 37 a week earlier and significantly lower than the average of around 125 ships per day before the fighting broke out. However, some oil and gas are still being transported through the route, with many ships turning off their automatic identification systems to limit the possibility of being tracked.

The disruption at Hormuz is directly impacting global energy supplies. Reuters , citing Shell’s calculations, reported that since the US-Israel and Iran conflict began in late February, the world market has lost approximately 1.6 billion barrels of crude oil and condensate, along with about 36 million tons of LNG.

Although countries have partially compensated by utilizing inventories, increasing production outside the Gulf region, and adjusting shipping routes, the market’s “shock absorbers” are gradually weakening.

This has driven up energy prices and increased costs for consumers and businesses worldwide. Crude oil prices approached $110 a barrel in September, while prices of refined products, particularly diesel, rose sharply.

Shell and Equinor warn that prolonged disruptions could keep energy markets volatile and that the supply restoration process could extend into 2027.

People wait to refuel their motorbikes at a gas station in Karachi, Pakistan, on September 17. Photo: Reuters.

LNG has also become a new flashpoint. Approximately one-fifth of the global pre-war LNG supply passed through Hormuz, making disruptions to this route particularly sensitive for gas-importing countries in Asia.

LNG supplies from the Middle East have fallen by around 36 million tonnes this year, while spot LNG prices in Asia have at times risen from around $10 to nearly $30 /MMBtu. China, India , and Pakistan have had to seek additional supplies from other regions, while shifting some of their demand to coal and oil.

This impact is driving a shift in the energy strategies of many countries. At last week’s Gastech conference, LNG businesses and importers said they are not only seeking to diversify their suppliers, but also to diversify their shipping routes to reduce reliance on maritime bottlenecks. Several Asian markets are sourcing LNG from West Africa, Indonesia , North America, and Australia.

The impact of energy prices is spreading to the broader economy. The International Monetary Fund (IMF) has warned that rising oil prices following the conflict have caused inflation to rise again in many economies, while energy-importing countries and those with limited policy space are more severely affected.

Source: https://lifestyle.zingnews.vn/gdp-iran-lao-doc-hon-10-anh-huong-lan-ra-kinh-te-toan-cau-post1684806.html