Iran’s Economic Futures: Deal, Stalemate, or War

While the Islamic Republic of Iran has hitherto survived its conflict with the United States and Israel, Iran’s economy is struggling, a grim prospect for the regime regardless of the outcome of the war.

• April 15: Writing in economic newspaper Donya-ye Eqtesad, Hamed Azargoun discussed three potential trajectories of inflation in Iran in 2026:
  • “The trajectory of inflation in the current year has become more closely tied than ever to political developments and scenarios. Within this framework, three main scenarios can be envisioned: reaching a political ‘agreement’ between Iran and the United States; the continuation of a ‘no war, no peace’ situation; and, finally, the resumption of conflict and escalation of tensions. Each of these three scenarios would have markedly different effects on inflation.”
  • “Estimates by Donya-ye Eqtesad, based on historical data, also show a significant gap between inflation rates across these scenarios. Even in the most optimistic case – achieving a stable agreement – inflation is projected to reach around 49%” by late 2026.
  • “By contrast, in a scenario of no war but no peace … the economy would face extremely high, triple-digit inflation, a situation that could lead to widespread economic instability … Under such conditions, the intensification of poverty and inequality could fuel growing social discontent and, indirectly, increase the risk of renewed external tensions. Implementing economic reforms – especially costly ones, such as exchange rate unification – would face significant difficulties and entail considerable costs in such an environment. Consequently, if structural reforms are delayed, the economy may become trapped in a vicious cycle of simultaneously worsening recession and inflation.”
  • “In the event of a failure in negotiations, the likelihood of renewed escalation and expanded damage to economic infrastructure would be significant. Although Iran’s military capabilities are assessed as substantial, the economic consequences of continued conflict could be severe. Under such conditions, rising government expenditures and constrained financial resources would increase the likelihood of reliance on inflationary financing – an outcome that, alongside the destruction of economic infrastructure, could lead to a sharp depreciation of the national currency and, in the worst case, hyperinflation.”
  • “Therefore, reaching a political agreement carries strategic importance from the perspective of controlling inflation and establishing economic stability.”

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