War Devastates Iran: Millions Fall into Poverty, Unemployment Rises
A fragile ceasefire between Iran, the United States, and Israel has provided a brief respite after six weeks of conflict that shook the region.
However, as the smoke clears, the economic damage to Iran appears far deeper than the casualty figures from the war. In a matter of weeks, millions of citizens have lost their sense of security, income, and opportunities for a decent life.
According to an analysis by Hadi Kahalzadeh in Responsible Statecraft, the latest estimates suggest that around 50% of Iran’s jobs are now at risk. An additional 5% of the population has been pushed into the abyss of poverty due to the war.
The official death toll announced by the Iranian government stands at 3,370 people. While political elites discuss strategy and security, the heaviest burden falls on ordinary households that have no influence over the direction of national policy.
Attacks during the war targeted civilian infrastructure and economic activity centres. More than 125,000 residential buildings and public facilities have been reported damaged. This figure approaches the number of structures affected during the eight-year Iran-Iraq War.
Among the impacted facilities are 339 healthcare facilities, 32 universities, 857 schools, dozens of police and fire stations, 20 Red Crescent centres, and 120 museums and historical sites.
These disruptions have created a chain reaction. Citizens needing ambulances, reporting accidents, or handling basic documents face paralysed public services. When government offices and emergency facilities are empty or destroyed, the wheels of the economy grind to a halt. Productivity falls, worker mobility is disrupted, and living costs rise.
More than 23,000 factories and companies are said to have been directly affected.
Many businesses in the surrounding areas have also shut down due to disrupted supplies and plummeting demand. Ports, airports, and transportation networks that support the distribution of food, medicine, raw materials, and labour have been shaken.
The Iranian government estimates the cost of reconstructing civilian infrastructure at US$300 billion, not including losses from investment, layoffs, inflation, and supply chain disruptions.
Sectors such as steel, petrochemicals, pharmaceuticals, and transportation are the main pressure points. These are sectors that employ millions of workers and form the backbone of national production. Even dairy factories have halted operations due to a shortage of packaging materials. Markets closed for days, liquidity tightened, and high uncertainty have sharply weakened household consumption.
Kahalzadeh estimates that 10 million to 12 million jobs are now under threat. Informal workers are the most vulnerable group due to minimal income protection. Low-skilled workers in the formal sector are also under pressure. In contrast, public sector employees and highly skilled workers are relatively safer. This means the war is widening the economic divide within Iran itself.
Even before the latest conflict, Iran’s economy was fragile. The World Bank estimated that Iran’s economy contracted by 2.7% in the fiscal year ending 20 March. In the period from March 2025 to March 2026, the value of the rial plummeted by nearly half, more than 750,000 jobs were lost, and inflation reached its highest level in 70 years. General inflation was recorded at 72%, while the price of basic food packages surged by 134%.
The war has then accelerated that pressure. The United Nations Development Programme (UNDP) estimates that Iran’s economy could contract by 8.8% to 10.4% compared to a no-war scenario for the Iranian year 1405, ending in March 2027.
Even if the conflict ends in 40 days, between 3.5 million and 4.1 million citizens are expected to have already fallen below the poverty line. If a wave of 3 million to 4 million layoffs occurs alongside triple-digit inflation, social pressures could intensify.
The Iranian government is preparing food subsidies, low-interest loans, tax incentives, unemployment benefits, and aid for damaged factories. The problem is that the state’s fiscal capacity is constrained. To fund basic food and unemployment benefits for just one year would require nearly 5 quadrillion rials, equivalent to 45%-50% of Iran’s public budget, which has long been burdened by high deficits.
For Washington, reading the war ceasefire as evidence that economic pressure is enough to force Iran to surrender could be a miscalculation. The greatest damage so far has hit civilians, while the state’s power structure remains intact.