Iran reports sharp GDP and energy-sector contraction amid war pressure

Iran's official data shows the economy contracted sharply in the first quarter of the Persian calendar year, with the oil and gas sector taking the biggest hit. The figures point to mounting pressure on Tehran's economy as the war with Israel and related US pressure continue to disrupt exports and trade. The decline was recorded over the period from March 21 to June 20.

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Data released by the government-administered Statistical Center of Iran showed gross domestic product fell 10.1% year-on-year in that period. Crude oil and natural gas activity contracted 26.4% compared with the same quarter a year earlier, while GDP excluding oil fell 4.6%. Industry and mining declined 14.7%, services fell 4.8%, and manufacturing contracted 2.5%, although agriculture grew 2.3%.

The contraction comes as Iran faces high inflation, a weakening rial and wider disruption to trade and industry. Earlier this month, the 12-month average inflation rate reached 69.9%, while food, beverage and tobacco prices rose at nearly twice that pace. Official unemployment stood at 9.1% in the spring, according to the same reporting.

The rial also weakened sharply, falling from about one million to the US dollar a year earlier to more than 2.2 million in early September. The energy sector is central to Iran's foreign currency earnings, so the fall in oil and gas output has wider economic significance. The reported decline in crude and natural gas activity suggests the war's impact is being felt most strongly in the country's main export industries.

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That matters because reduced export capacity can deepen shortages of hard currency, add pressure to prices and complicate efforts to stabilise the economy. The figures also fit a broader pattern of strain on Iran's oil trade during the conflict. Estimates cited in the reporting indicate crude and condensate loadings fell from about two million barrels per day in March to roughly 740,000 in July and 220,000 to 255,000 in August.

The same reporting said tanker traffic and storage were affected, with cargoes trapped in the Strait of Hormuz and large volumes of crude afloat. What remains unclear is how long the contraction will last and whether the government can offset the losses through other sectors or policy measures. The next key indicators will be whether oil exports recover, whether inflation continues to accelerate and whether industrial output stabilises.

For now, the official data suggests the war is feeding directly into a broader economic downturn.

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