Iran inflation hits 66% as war squeezes households

Iranian households are making sharper trade-offs over food, transport, classes and healthcare as five months of war with the United States add pressure to an economy already hit by sanctions and currency weakness.

Inflation reached 66 percent in the year ending July 22, up from 46 percent in the year ending February 19. The Iranian rial has fallen to 1.88 million against the US dollar, compared with 1.65 million before the conflict.

In Tehran, 21-year-old shop worker Mahzad Azari said she has delayed ordinary purchases and cut back on small pleasures such as visiting cafes. She said using a ride-hailing app can mean skipping lunch, while replacing her glasses lenses would mean missing an English class.

Davood, a 23-year-old fruit and vegetable vendor, said holidays and weekend meetings with friends have become unaffordable. Fahimeh, 29, said going to the cinema, dining out or buying takeaway food has been replaced by “survival”.

The economy has been battered by decades of international sanctions and further pressured by the US-Israeli war that erupted on February 28. Hopes for recovery rose briefly after an April 8 ceasefire and the signing of a June 17 framework for peace talks, but the fighting resumed and spread further across the Middle East.

Iranian officials have invoked the “resistance economy” strategy, first promoted by late supreme leader Ali Khamenei in 2010 to reduce reliance on the outside world. Iran's new supreme leader Mojtaba Khamenei called in May for lawmakers to support the strategy and ease economic pressure.

Tehran-based economist Behnam Samadi said Iran's economy had adapted to repeated crises but that resilience had imposed costs on households, businesses and the government. He said households had faced declining purchasing power, businesses higher operating costs and the government higher public spending.

Businesses in Tehran have expanded instalment payment schemes for expenses from groceries to medical bills. Samadi said the plans can help companies with cash flow and households spread costs, but called them a “time-buying” tactic rather than a solution.

Amir Reza, a 23-year-old handyman, said buying a home or car felt further out of reach. Ehsan, a grocery vendor in Tehran, said customers' shopping baskets were shrinking, including for basic food items.