Global oil glut, price drop spell more trouble for Iran next year

From April to June, Israel’s business sector contracted 6.2%. Private consumption dropped 4.1%, public spending fell 1%, and investment in fixed assets plunged 12.3%, signaling weakening confidence.

Exports of goods and services, excluding startups and diamonds, declined 3.5%, while imports, excluding defense purchases, rose 3.1%.

The downturn followed the June conflict with Iran, which began after Israel attacked military and nuclear sites on June 13.

Iran responded with missile strikes that forced many Israelis into shelters.

The United States joined on June 22 with airstrikes on Iran’s nuclear facilities at Fordow, Natanz, and Isfahan. A US-brokered ceasefire took effect on June 24, ending the 12-day war.

Bank of Israel Governor Amir Yaron told Bloomberg in late June that the fighting was likely to cost nearly $6 billion or 1% of GDP.

Analyst Andreas Krieg told TRT World that overall losses could reach between $11.5 billion and $17.8 billion, around 2% to 3% of Israel’s economy.

Costly for Tehran

The conflict also took a heavy toll on Iran’s economy.

Krieg estimated Iran’s direct and indirect losses at $24 billion to $35 billion, equal to 6% to 9% of its $380 billion GDP.

The conflict also dealt a heavy blow to Iran’s trade: non-oil exports in June totaled $3.4 billion, according to Iranian customs statistics—a 34% drop from a year earlier.

Iran’s digital economy was also hit.

The communications minister reported a 30% contraction and losses of 150 trillion rials (about $170 million) in one month, attributing the damage to widespread internet restrictions imposed during the fighting.

President Masoud Pezeshkian formally signed the tax bill on Friday, passed by parliament in late June.

The law targets capital gains on real estate, vehicles, gold, jewelry, silver, platinum, foreign currency, and even cryptocurrencies.

“For properties held between two and five years, 50 percent of inflation is considered,” said Mehdi Movahedi Beknazar, spokesperson for Iran’s Tax Administration in July. “If the property is held for more than five years, full inflation adjustment is applied.”

In effect, tax will be levied on the profit plus 50 percent of the increase in asset prices due to inflation.

For example, if a citizen buys an apartment in 2024 for 50 billion rials (about $55,500) and, due to 40 percent inflation, its value rises to 80 billion rials (about $88,800) in 2025, the 30 billion rial increase (about $33,300) is treated as profit, and therefore is taxable.

Iran’s year-on-year inflation rate rose to 41.2% last month, marking the highest level in two years, according to Iran's Statistical Center.

The Ministry of Economy has been tasked with creating a smart system that links to registries of deeds, the stock exchange, customs and the Central Bank to identify transactions subject to the law.

A first-of-its-kind approach

State media have praised the law for “taking inflation into account,” framing it as a tool against hoarding in a country where inflation often exceeds 40 percent.

Under the 28-article law, assets sold within a year will be taxed at 20–40 percent, with lower rates applying to longer holding periods. Exemptions include primary homes, one family car, and production-related properties such as farms and factories.

Penalties for evasion include blocked property transfers, bans on commercial activity, and fines of up to twice the tax owed.

Global benchmarks

Most nations impose capital gains taxes, but none explicitly tax inflation in the same way.

The United States taxes nominal gains without inflation adjustment. Britain used to allow inflation indexation until 1998 but abolished it. Chile and Brazil adjust long-term gains for inflation, while Australia offers a 50-percent discount for assets held over a year.

Authorities argue the law will curb speculative activity in housing, cars, and gold sectors, where prices have soared and wealthier Iranians often shelter assets.

Leading ultraconservative cleric and MP Hamid Rasai, pushing for a parliamentary probe into the president’s performance, seized on Pezeshkian’s recent comments about the Zangezur corridor and his remark that Iran has no choice but to negotiate with the United States.

“Critics say raising the issue of Pezeshkian’s political inadequacy in the midst of two wars is against expediency!” he wrote on X on August 13.

“The session that led to the disqualification and ousting of Iran’s first president, Abolhassan Banisadr, was also held during the 1980s war with Iraq.”

Rasai, who believes another confrontation with Israel is imminent, argued that while Pezeshkian is “not a traitor like Banisadr,” he is “ignorant of his responsibilities” and equally damaging to the system. “If he doesn’t take the initiative himself,” Rasai added, “let’s not deceive ourselves.”

Some social media users urged Rasai to voice such criticisms in parliament rather than online, while others attacked his own legitimacy, noting he was elected with just 4% of the vote compared with the far higher turnouts of MPs who impeached Banisadr.

Moderates join the fray

Even figures from Iran’s moderate camp are voicing disillusionment.

Ali Mohammad Namazi told conservative outlet Nameh News that Pezeshkian had failed to deliver on his 2024 campaign pledge to lift sanctions, re-engage with the world, and revive the economy.

Namazi said the president’s promise to form an active government from across the political spectrum instead produced “a cabinet of mediocre ministers” with “no outstanding economic or political figures.”

He added that industrial activity had stalled under budget constraints, energy and water shortages, and a lack of investment — leaving households waiting for sanctions relief to meet basic needs.

“Pezeshkian’s most important political promise was to hold talks with the West to lift sanctions and boost oil revenues,” Namazi said. “Not only did that not materialize, but even the negotiations expected to bear fruit within two months were halted following a damning IAEA report and a resolution tabled by Germany, France, and the United Kingdom.”

A systemic crisis

The intensifying criticism — from across Iran’s political spectrum — comes as the country faces the possible snapback of all UN sanctions, a blow that could sever its economic lifeline.

Hardliners like Rasai frame the moment as a prelude to war; moderates like Namazi see a presidency adrift.

For many Iranians online, however, the attacks only underline a deeper reality: the country’s troubles lie in a rigid political system that no president alone can fix.

In an August 12 video, the Israeli prime minister cited President Masoud Pezeshkian’s own admission of deep crises to assert that Iranians don’t even have clean water to give to their children.

He pledged that once people toppled the Islamic Republic and Iran was “free,” Israeli water experts would go to “every city” with desalination and recycling technology.

Reactions: from praise to scorn

Thousands of Iranians reacted on X and other platforms. Supporters called Israel “the true friend of the Iranian people” and urged others to heed Netanyahu’s call.

Others interpreted the message as a signal of another imminent Israeli strike.

“These consecutive messages from the Israelis … carry an important warning,” one user wrote. “The Iranian people are very close to a second round of attacks. It’s better for you to take to the streets so that the cost for both us and you will be lower.”

Some even urged further Israeli action.

“We still need your help. Target the remaining leaders of the regime so that overthrowing it becomes easier for the people,” read another comment.

But many doubted the call would have any effect.

“As someone in Tehran, I must say that there is no way people will take to the streets,” one user posted. “They have no hope, and what you’re saying is not feasible before Khamenei and [his son] Mojtaba are declared dead.”

Criticism of the messenger

Others went further, turning their fire on Netanyahu himself.

“Contrary to Netanyahu’s false claim, the water Israelis drink in abundance is not the product of Israeli technology; it is water denied to the Palestinians,” lawyer Reza Nasri posted.

Some referenced alleged Israeli strikes on water infrastructure during the 12-day conflict.

“Khomeini came with promises of free water and electricity and delivered rooftop executions,” activist Amir Ebrahimi wrote.

“Netanyahu talks of providing water, and the result of his promise was the bombing of the main Tajrish water pipeline and the killing of people. Criminal dictators and charlatans share the same principles.”

Officials and state media push back

Top political and security figures, including Pezeshkian, Supreme National Security Council secretary Ali Larijani, and Foreign Minister Abbas Araghchi, dismissed or mocked the message.

State TV aired a vox-pop segment, mixing genuine and staged interviews, ridiculing Netanyahu’s claim that Iranians could water-ski again in the Karaj Dam if the Islamic Republic fell.

The dam, once a popular recreation site, is now almost dry.

‘Root cause’

Criticism also came from those outside the government, including activists who oppose Tehran’s rule but saw Netanyahu’s comments as misleading or self-serving. 

These voices sought to shift the conversation from Israel’s role to Iran’s own governance failures.

“Netanyahu spoke of desalination… these plants were built entirely by Iranian private companies,” environmental activist Reza Karimi wrote on X alongside images of two desalination plants in southern Iran.

“Our problem with water is not technology. We are exporters of water engineering projects. Our problem is poor water governance.”

It’s a task Ali Khamenei once handled directly — intervening to rein in factions and reassert unity — but his low profile in recent weeks has left a vacuum.

Not long before this “visible invisibility,” Khamenei publicly warned against the perils of political loose talk.

“Our shortcomings, our tongue wagging, our pointless bickering, our lack of patience, our incorrect analysis of the situation, sometimes change the course of history,” he said on April 24.

At the time, the remarks were read as a reprimand to officials for lax security and for letting their rivalries spill into the open, weakening Tehran’s hand in dealings with adversaries, above all Israel and the United States.

Now, those same dynamics are on display again, but it’s the IRGC playing nanny, sweeping up the shards of political infighting while Khamenei focuses elsewhere.

The clerical establishment is trying to thread an impossible needle: secure sanctions relief, or at least stave off a European “snapback” of UN sanctions, through diplomacy, while rebuilding its triple deterrence— missile and drone stockpiles, its proxy network, and uranium enrichment program.

Fracas One: ‘golden calf’

On August 5, Saeed Jalili, a Khamenei representative to the Supreme National Security Council and a prominent hardliner, lashed out at advocates of renewed talks with Washington, calling them “golden calf worshippers”—a scriptural reference denoting impatience and betrayal.

Jalili, who lost to Masoud Pezeshkian in the 2024 presidential race, has long opposed engagement with the West. But this time his remarks drew fire not just from reformists, but also from the hardest core of Iran’s power: the IRGC.

The IRGC-linked daily Javan warned that airing strategic disputes in public was “harmful,” while the Guards-affiliated Tasnim news agency cautioned against “radicalism.”

Only Raja News, tied to the sidelined family of late president Ebrahim Raisi, backed Jalili — a move likely aimed at clawing back influence.

Under sustained pressure, Jalili retreated on August 12, posting on X that failing to negotiate when opportunities arise would “cause losses,” citing Khamenei’s April endorsement of Oman-mediated nuclear talks with the U.S.

Fracas Two: no way but to talk

From the other side of the political spectrum, President Pezeshkian triggered the next flare-up on August 10.

“You reject engaging in talks. What’s your alternative? Do you want to fight? Fine, [the adversaries will] strike again. Then you have to repair the damage… These are not issues to be approached emotionally,” he told critics.

Reformist outlets hailed his “realism” and “honesty,” while hardline media accused him of advocating “surrender.” Again, the IRGC intervened.

Aziz Ghazanfari, a senior political chief, praised Pezeshkian’s “honesty and purity,” but warned that “not everything should be said in public” and urged him to stick to pre-approved, scripted comments.

Whether the IRGC can keep senior politicians’ “tongue wagging” in check—and prevent Khamenei’s carefully balanced machinations from unravelling—may determine whether Tehran’s strategy holds or fractures again.