NEW YORK, NY, August 17, 2026– Iranian President Masoud Pezeshkian has offered an unusually candid public admission that the country’s economy has deteriorated sharply since fighting broke out with the United States and Israel earlier this year, pointing to collapsing oil revenues and widespread damage to industrial facilities as the central drivers of the crisis.
Speaking in remarks carried by media over the weekend, Pezeshkian said falling petroleum exports have removed Iran’s primary source of state income, pushing up consumer prices as import costs climb. “We used to sell oil, but now we cannot sell it,” he said, a rare acknowledgement from a sitting president that international pressure has directly crippled the country’s main revenue stream.
In addition, he mentioned damage done to the manufacturing base of the nation due to the destruction of many factories by strikes carried out during the war. This damage, according to him, has not only hampered the production process but also eliminated an entire source of tax revenues. He noted the government can no longer collect taxes from many industrial facilities and must instead extend them financial support just to keep operations running, describing the fiscal gap as one that has “multiplied many times over” even as revenues shrink.
Supply chain networks have also been affected by the conflict. The supply of goods, which used to reach Iran via direct imports, is now being delivered via longer and more indirect routes, as per the president, making the cost of finished products higher.
The economic pressure stems from an aggressive flare-up in the latter half of February, when Israeli and American forces jointly attacked Iranian military, nuclear, and energy facilities. In retaliation, Iran conducted attacks on Israel and US assets throughout the region using missiles and drones. In June, with the help of Pakistan and Qatar mediations, a memorandum of understanding was agreed upon, ending the ongoing hostilities and paving the way for further negotiations aimed at settling. However, the negotiations have been stuck, mainly due to issues with security and freedom of navigation in the Strait of Hormuz.
This impasse has direct implications for Iran’s economy insofar as nearly one-fifth of the natural gas and seaborne oil trade in the world goes through the strait, according to data from the U.S. Energy Information Administration’s transit chokepoint analysis. Any interference with navigation rights in the strait limits exactly those exports which the Tehran regime needs for its economic revival. The Iranian Parliament is set to introduce a bill relating to control of the strait and foreign presence in the country following a shipping agreement signed between Iran and Oman.
The diplomatic initiative continues to be delicate. Pezeshkian has also separately justified the memorandum to Washington, saying that Tehran did not make any compromises while signing it, even as it engages with the US in a cautious way. Those monitoring the region say that the sustainability of any deal is going to depend significantly on how both sides manage to settle their difference at Hormuz, since the restrictions on oil tanker activity will continue to put pressure on the struggling economy of Iran.
For ordinary Iranians, the practical effect has been felt in everyday prices, as a weaker currency, costlier imports and reduced government capacity to support struggling industries combine to squeeze household budgets. With reconstruction needs mounting and oil exports still constrained, officials in Tehran face a narrowing set of options to stabilize the economy without a durable resolution to the standoff over Hormuz.
