Iran Faces Severe Economic Pressure After U.S. and Israeli Strikes

Iran's government has withstood U.S. and Israeli military strikes but the economic conditions that contributed to the recent conflict have worsened. Spiraling inflation and a collapsing currency triggered mass protests in late December and early January.

Authorities responded with a crackdown that left tens of thousands dead according to estimates. An official in Iran's labor and social affairs ministry said the war has put a million people out of work. Top employers in the oil and manufacturing sectors suffered damage from the conflict.

Parliament's speaker and top negotiator warned Wednesday that the U.S. blockade represented a "new phase" of war. The speaker said the enemy has pinned great hope on economic pressure. The government has urged citizens to limit consumption of water, electricity and gas.

Authorities in the capital called on residents to use public transportation instead of private cars while the steel industry encouraged companies to ration steel sheets. First vice president admitted that prices for certain products rose by more than 100 percent in less than a week.

The overall annual inflation rate reached 67 percent in mid-April from a year earlier according to the central bank. That figure aligns with resident reports from Tehran and other cities that some prices increased around 40 percent in the six weeks after the war began.

Food inflation had climbed to 64 percent annually in October before accelerating to 105 percent by February pushing overall inflation to 47.5 percent just before the conflict. A housewife in Tehran reported that a block of cheese rose 29 percent in price in one week.

Authorities are expected to approve a 40 percent increase in the price of cement which is needed for rebuilding war damage. Prosecutors in Tehran have said they will impose sentences of up to 20 years in prison and flogging on those convicted of price gouging or hoarding staple goods.

The government has raised wages distributed cash to the poor and issued coupons for items including rice chicken and cooking oil. These measures are adding further strain to government finances. Without new revenue authorities could face difficulty meeting payroll which would threaten the government's ability to maintain control according to an insider close to the establishment who spoke last month.

Another official said the country will face a disaster if sanctions are not lifted. The official noted that the largest industrial plants will require months or years to repair.

Iran's currency reached a record low of 1.8 million rial against the U.S. dollar on Wednesday. The rial had fallen 8 percent in the first month and a half of the war and lost 60 percent of its value in the months following a 12-day conflict with Israel last June.

State media estimated that reconstruction could cost around $270 billion. That sum equals nearly 80 percent of Iran's GDP of $341 billion. Hopes for a lasting peace agreement between the U.S. and Iran remain high but rebuilding efforts would take years.

The government may not be able to count on neighbors such as the United Arab Emirates to help facilitate oil trades or provide capital after the conflict ends. Some residents have responded to the grim outlook with increased spending on immediate consumption.

One woman visiting Turkey in late April described packed restaurants even as the broader economy stagnated saying many have stopped trying to save.