Iran International
War has erased Iran’s already weak growth prospects. The economy shrinks as prices rise at one of the region’s fastest rates, forcing households to bear war, sanctions and years of economic mismanagement through fewer jobs, weaker incomes and collapsing purchasing power.
The International Monetary Fund expects Iran’s economy to contract by 6.1% in 2026, after an estimated decline of 1.5% last year. Average consumer-price inflation, already above 50% in 2025, is forecast to accelerate to 68.9%.
The combination matters more than either number alone. A recession means the economy is producing less, companies are selling less and opportunities for work and investment are narrowing. Inflation approaching 70% means the income that remains loses value at extraordinary speed.
For Iranian households, the result is a squeeze from both directions: fewer ways to earn money and far less purchasing power once they receive it.
The scale of the deterioration is also visible in the IMF’s revision. Only three months earlier, it had expected Iran to record modest growth of about 1.1%. It has now cut that estimate by 7.2 percentage points, one of the sharpest downgrades in the report.
“Growth in Iran in 2026 is revised downward by 7.2 percentage points, relative to January, to –6.1 percent,” the IMF said.
The fund links the reversal to damage to energy and transport infrastructure, diminished production and exports, and disruption around the Strait of Hormuz. It places Iran alongside Iraq, Qatar, Kuwait and Bahrain among the regional economies most directly exposed to the conflict.
The downturn is expected to reach the labor market. Unemployment is forecast to rise from 8% to 9.2%, though that figure captures only part of the pressure in an economy where informal work, underemployment and falling real wages are widespread.
The inflation data are even more severe. The IMF forecasts average inflation of 68.9% over the year and an end-of-year rate of 48.7%. The difference suggests the pace of price rises may slow later in the year, but not enough to restore anything resembling price stability.
It also means that a lower inflation rate would not make goods cheaper. Prices would still be rising rapidly from an already much higher base, leaving food, housing and other essentials increasingly beyond the reach of households whose wages have failed to keep pace.
The regional comparisons make Iran’s position clearer. Saudi Arabia and the United Arab Emirates are each expected to grow by 3.1%, while Oman is projected to expand by 3.5%. Their inflation rates are forecast at 2.3%, 2.5% and 1.7% respectively.
Qatar and Iraq face even deeper contractions, at 8.6% and 6.8%, largely because of damage and disruption to energy production. But inflation in both is expected to remain close to 3% or 4%. Iran’s particular crisis is that it combines a wartime recession with an inflation problem that was already deeply entrenched before the fighting.
Türkiye offers another useful comparison. It has struggled with years of high inflation, yet the IMF still expects its economy to grow by 3.4% in 2026 while inflation averages 28.6%. Iran’s inflation rate is more than twice as high, while its economy is moving sharply in the opposite direction.
Iran’s external position is also weakening. The current account – the broad measure of money flowing into and out of the country through trade and other transactions – is expected to move from a surplus of 0.6% of GDP to a deficit of 1.8%.
For a major oil and gas producer, that reversal points to lost export earnings, damaged production and less access to foreign currency. By contrast, the UAE is expected to retain a surplus of 11.4%, Qatar 11% and Oman 7.5%, giving those governments far larger financial cushions.
The figures should still be treated with caution. The IMF’s Iran data depend partly on national accounts, inflation and balance-of-payments information supplied by the Islamic Republic’s finance and monetary institutions. The fund also uses staff estimates where complete information is unavailable and says the timeliness, accuracy and completeness of its database cannot be guaranteed.
That makes the report an informed estimate, not an independent audit of Iran’s economy. Official statistics under the Islamic Republic are often delayed, incomplete or shaped by a system with several exchange rates and limited transparency.
The IMF itself uses the NIMA (an acronym for integrated system of foreign exchange) trade-related rate to convert Iranian GDP into dollars from 2018 onward, rather than the official rate that is lower, because it considers NIMA more representative of transactions.
Even that does not fully reflect the much weaker market rate experienced by many Iranians because it still overstates the rial’s value compared with the open market: the dollar is about 1.48 million rials at the NIMA rate today, against roughly 1.78 million rials on the street, a gap of about 21%.
South Pars carries the shock beyond Iran
The damage is not confined to Iran. The IMF says strikes on the South Pars gas field sharply reduced the prospect of a quick recovery in regional gas supplies and were followed by Iran’s attacks on Persian Gulf energy facilities, including Qatar’s Ras Laffan complex.
European benchmark gas prices rose 61% between August 2025 and March 2026, while Asian LNG prices jumped by more than 80%. Asia is particularly exposed because more than three-quarters of LNG shipments passing through the Strait of Hormuz are bound for Asian markets.
The IMF’s central forecast still assumes a relatively short conflict and a gradual restoration of production and transport. Under that assumption, global growth slows to 3.1% and inflation rises to 4.4%. But the report says a longer disruption could push global growth close to 2% and inflation toward 6%.
The same warning applies more acutely to Iran: the forecast contraction of 6.1% is not a worst-case estimate, but one built on the assumption that the war’s economic damage begins to ease.
The message had been set in advance by the Friday Prayer Policy Council, which announced that weekly services nationwide would become “Fridays of Blood Vengeance and Revenge” until those blamed for Khamenei’s killing were punished.
The council said revenge was not an emotional response but a “strategic” and religious duty, explicitly naming US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu.
“Carrying out retribution against the principal criminals – particularly the criminal Trump and the child-killing Netanyahu – is an unchanging element of divine justice,” its statement said.
It went further, saying every person or group with the ability to act had a duty to “rise for jihad” and carry out the task without delay. The council said banners calling for vengeance for Khamenei would remain beside Friday prayer pulpits until retribution was achieved.
The language was repeated across major cities.
In Mashhad, where Khamenei was buried, Friday prayer leader Ahmad Alamolhoda said retaliation must be seen by the public rather than remain an unfulfilled promise.
“Revenge and blood vengeance for the martyred leader must remain before the eyes of the people, and the people must see it with their own eyes,” he said. “Only then will real revenge have been taken.”
Saeed Jalili, the Supreme Leader’s representative to the Supreme National Security Council, told worshippers in Mashhad that revenge was a national right and a responsibility for officials.
“If you say Iran’s assets must be released, the greatest asset of our nation was its beloved leader,” Jalili said. “Today, the nation’s right is to defend this great asset through revenge, and it is the duty of officials to pursue it.”
Bushehr’s interim Friday prayer leader Yousef Jamali said worshippers would continue chanting for revenge until the United States and Israel were punished.
“We will stand alongside the officials and the armed forces and, God willing, bring the White House down on its occupants,” Jamali said. “Know that the sword of our revenge will fall upon the oppressors.”
In Rasht, cleric Rasoul Falahati linked revenge to the dispute over the US-Iran memorandum and navigation through the Strait of Hormuz.
“Negotiating in the middle of a war is meaningless,” he said. “Under the recent understanding, we opened the Strait of Hormuz, but America fulfilled none of its commitments and instead moved to further reinforce its bases.”
He said Muslims and “free nations” around the world were ready to take revenge on Trump and Netanyahu and urged Iran’s armed forces to respond firmly to any further US action.
Tehran Friday prayer leader Mohammad Hassan Aboutorabi Fard also accused Washington of violating the memorandum and rejected any US role in the strategic waterway.
“We explicitly declare that under no circumstances will the United States be allowed to interfere in the affairs of the Strait of Hormuz,” he said.
In Qom, Alireza Arafi described revenge against those who carried out and ordered Khamenei’s killing as a legal and religious right that would not be forgotten.
Shiraz interim Friday prayer leader Adel Hajipour used almost identical language, saying the destruction of those responsible was a public demand.
In Malayer, Mohammad-Ali Arzandeh said Friday prayers would remain “Fridays of revenge and blood vengeance” until Israel was destroyed and those blamed for regional insecurity were eliminated.
The emerging message is not unity around solving Iran’s deepening economic, security and diplomatic crises, but unity around revenge, resistance and obedience to the new leadership.
The Islamic Revolutionary Guard Corps put that message in explicit terms after Khamenei’s funeral ceremonies in Iran and Iraq, describing the processions as a display of loyalty, unity and resistance.
In a statement thanking the public and officials involved in the ceremonies, the IRGC said “blood vengeance” for Khamenei and others killed was a “certain, legitimate and unforgettable demand.”
It said punishment of the “agents, commanders and supporters” of the killing would remain in the memory of the Islamic community and the so-called resistance front until what it called justice was achieved.
Banners and posters threatening Trump, including calls to kill him and references to bounties, were a recurring theme during the week-long funeral processions for Khamenei, turning the language of vengeance into one of the ceremony’s most visible messages.
The IRGC statement did not name Trump, but its language echoed a wider funeral narrative in which the US president was repeatedly cast as a target of vengeance.
It also framed the funeral processions in Najaf and Karbala as proof of the bond between Iran, Iraq and Tehran’s regional network, and said the IRGC and allied forces would continue Khamenei’s path under Supreme Leader Mojtaba Khamenei.
The message came as hardliners inside Iran were also targeting officials involved in diplomacy with Washington.
The tension has been visible since the announcement of the memorandum with Washington, which hardliners rejected from the outset with slogans such as “We do not accept.” What began as opposition to the agreement soon turned into direct attacks on President Masoud Pezeshkian, Foreign Minister Abbas Araghchi and Parliament Speaker Mohammad Bagher Ghalibaf.
According to ILNA, the confrontation peaked during Khamenei’s funeral ceremonies, which authorities had sought to present as a symbol of unity and political continuity. Instead, groups in the crowd chanted “Death to the compromiser” and slogans against Pezeshkian, Araghchi and Ghalibaf.
Footage from the ceremonies showed Pezeshkian being addressed with insulting chants. Another video showed people throwing stones toward Araghchi and shouting abuse at him, drawing reactions from political figures and media outlets inside Iran.
ILNA warned that national unity cannot be preserved through insults, vilification and polarization, saying some hardliners had moved beyond political criticism into efforts to deepen internal divides.
Mohammad Mohajeri, a conservative political activist, called the chants against Araghchi and Ghalibaf an “Israeli sedition” and warned that silence by Mohammad Bagher Zolghadr, secretary of the Supreme National Security Council, and other council members could be read as complicity.
Hesamodin Ashna, a former adviser to Hassan Rouhani, also reacted to the attacks on Araghchi, writing on X: “The same person you are stoning is standing up for you.”
Unity and retaliation
Mohammad-Saleh Jokar, head of parliament’s internal affairs and councils committee, told ILNA the country needed unity “more than ever” and said polarization was what the enemy wanted.
But his definition of unity also centered on retaliation.
“If we are to avenge the blood of the martyrs and the martyred Imam, this will certainly be achieved in the shadow of unity,” Jokar said.
He said Iranians should direct their anger at the United States, adding that “criminal America” must be held accountable and that the nation would not leave alone those who had committed “evil and crime.”
Jokar said the funeral ceremonies had displayed the “strength and power” of the nation and angered the enemy. “We must act in such a way that it dies of this anger,” he said, adding that the “blood of our martyrs” must be avenged.
Call for nuclear weapons
Some hardline lawmakers have pushed the message further. Hossein Samsami, a member of parliament’s economic committee, told Didban Iran that taking revenge for Khamenei’s death required strengthening Iran’s offensive and defensive capabilities and reconsidering the country’s nuclear doctrine.
“A change in our nuclear doctrine is one of the requirements for taking revenge,” he said, implying that Iran should make nuclear weapons.
Samsami also said those responsible for Khamenei’s killing should be treated like Salman Rushdie, referring to Ruhollah Khomeini’s fatwa calling for Rushdie’s death.
He accused Washington of using diplomacy and the funeral period to gather intelligence on Iranian officials, saying the ceasefire and funeral ceremonies were used to identify their residences for future assassinations.
“The enemy enters through the door of peace to break your neck,” he said.
These remarks show how the language of revenge is spreading beyond military retaliation into broader demands for a harder ideological, nuclear and security line.
That shift comes as ordinary Iranians face the consequences of renewed confrontation, from economic pressure and insecurity to the risk of wider war.
ILNA warned that whenever politics has moved toward harsh polarization and the elimination of rivals, “the whole society has paid the price.”
For now, however, the loudest official language around unity is not focused on that price. It is focused on revenge, loyalty and the claim that disagreement itself may serve the enemy.
