Iran's Middle Class Slides Into Poverty as War Intensifies Economic Crisis

Mina no longer buys red meat. Chicken has become a luxury she can barely afford. Since the war began last year, she tells herself that survival means rent and food—nothing else. The dinner table in her Tehran home has become a map of what her family can no longer have.

She is not alone. Across Iran, millions of middle-class families are experiencing the same contraction, the same daily arithmetic of loss. The International Monetary Fund projects the Iranian economy will shrink by 5.4 percent this year while inflation approaches 69 percent. The World Bank warns that the conflict, combined with weakened trade and prolonged uncertainty, is crushing the country's economic foundation. What began as a pre-existing crisis—inflation already above 40 percent, a deteriorating currency, chronic budget deficits, years of sanctions—has been violently accelerated by war.

Ahmad Alavi, an economist based in Sweden, distinguishes between cause and catalyst. The war did not create Iran's economic collapse, he explains, but it functioned as a shock that shattered what remained. Infrastructure damage, disruption of shipping through the Strait of Hormuz, internet shutdowns, and spiraling inflation expectations have combined to hollow out purchasing power. Official figures show annual inflation at 66 percent, with year-over-year inflation climbing toward 88 percent. Food prices have risen faster still: bread and cereals up 140 percent, meat and poultry up 135 percent, dairy products up 116 percent, edible oils up more than 200 percent. These are not abstract percentages. They are the reason families stop buying protein. They are why medical treatment gets postponed. They are why saving money becomes impossible.

Alavi estimates that between 3.5 and 4.5 million Iranians have fallen into poverty since the conflict intensified, bringing the total number living below the poverty line to more than 40 million. Lower-income households have suffered most acutely, but the middle class—salaried workers, pensioners, families that once felt secure—is now experiencing the same pressures. Many have crossed the poverty line for the first time because their incomes have simply failed to keep pace with inflation.

The private sector is being squeezed from a different angle. Morteza, an Iranian trader, watched regional supply chains reorganize almost overnight. China moved quickly to fill gaps left by suppliers in Dubai, using rail links across Central Asia to avoid the risks and delays of maritime transport through contested waters. But this shift has brought Iranian merchants no relief. The collapse of the rial and soaring inflation have prevented markets from growing. Exchange rates change almost daily. Goods purchased at one price must be replaced at a much higher cost—if customers still have the purchasing power to buy them at all. For Morteza, uncertainty has become the primary obstacle to business. "With tensions continuing, I honestly don't see a clear future for doing business in Iran," he says.

The government has deployed subsidies, price controls, and foreign exchange interventions to ease immediate pressure. But Alavi argues these are short-term responses to structural problems that run much deeper. Even higher global oil prices offer little benefit because sanctions, export restrictions, and elevated transport costs continue to limit Iran's oil revenues. Without restored confidence, sanctions relief, and solutions to underlying economic problems, these measures will not address the fundamental crisis.

Uncertainty itself has become one of the largest barriers to recovery. Businesses delay investment because they have no confidence in future conditions. Households become increasingly cautious about spending, expecting prices to rise further and their incomes to fall. Rebuilding confidence among investors, businesses, and consumers will take far longer than repairing physical infrastructure. Unless inflation eases, the exchange rate stabilizes, and trade conditions improve, many households will remain under financial pressure even if military tensions subside. Alavi expects living standards to deteriorate further if current trends continue. More families will cut spending on protein, healthcare, and education. Business closures and unemployment may rise.

Mina has stopped thinking about the future. "We only hope we can afford next month's rent," she says. For millions of Iranians, hope has narrowed to the immediate and the essential.