The oil and gas sector in Iran contracted by 26.4%, according to new official data, indicating the economic impact of the ongoing US-Israel conflict on the country. Data from the Statistical Center of Iran revealed that the gross domestic product (GDP) decreased by 10.1% year-on-year between March 21 and June 20, coinciding with the early months of the conflict that began on February 28.
The economic downturn has been exacerbated by challenges in oil exports, which are critical for foreign currency, alongside high inflation, a depreciating rial, and trade disruptions. The GDP figure masks a more significant decline in the energy sector, while GDP excluding oil fell by 4.6%.
Other sectors also experienced contractions: industry and mining by 14.7%, services by 4.8%, and manufacturing by 2.5%. Agriculture was the only sector to grow, increasing by 2.3%.
Iran's inflation rate reached 69.9% over the past year, with food and beverage prices rising at nearly double that rate. Unemployment also increased to 9.1% in the spring. The rial's value plummeted from about one million to the US dollar a year ago to over 2.2 million in early September.
The US naval blockade has severely limited Iran's ability to sell crude oil, with loadings dropping from approximately two million barrels per day in March to around 740,000 bpd in July and between 220,000-255,000 bpd in August, according to estimates from Kpler and Vortexa.
Reports indicate that 29 tankers carrying 36.11 million barrels of crude were stranded in the Strait of Hormuz, and the total amount of Iranian crude at sea decreased from 135 million barrels at the end of July to 107 million barrels by late August.
President Masoud Pezeshkian stated that total trade had fallen by 25 to 35 percent as of September 6, with imports being more affected than exports due to the blockade.
Iran's security chief Mohsen Rezaei linked the end of the conflict to economic relief, stating that conditions include the release of frozen funds and an end to the naval blockade. US Treasury Secretary Scott Bessent announced an economic pressure campaign against Iran, targeting its financial interests globally.
The conflict has disrupted trade with the UAE, which imposed an indefinite trade embargo on Iran after accusing it of missile attacks, a claim Iran denied. Market analyst Chris Beauchamp noted that the 10% drop in GDP indicates that US pressure is effective, but the resilience of Iran's economy remains uncertain.
Despite the challenges, Iran has expressed openness to diplomatic solutions to end the conflict, with Rezaei stating that formal conditions have been communicated to Washington through Qatari mediators. Iranian Foreign Minister Abbas Araghchi is expected to visit Qatar before attending the UN General Assembly in New York.
Rezaei did not dismiss the possibility of further US strikes against Iran, indicating ongoing tensions. Republican strategist Mark Pfeifle commented that both Iran and the US are still interested in negotiating, as evidenced by the omission of certain demands in discussions.
SOURCE: Al Jazeera English