Can Tehran seek revenge and negotiate with Washington?

The directive, carried by the state-run ISNA news agency, described participants as Iran’s “summoned people” and said the gatherings had expanded with the supreme leader’s approval and guidance.

It said government supporters remained in mourning and were seeking revenge for those killed in the war, particularly former Supreme Leader Ali Khamenei, and should therefore remain in public squares until further notice.

The nightly gatherings began after Ali Khamenei’s death was announced at the start of the war in late February. Government institutions sustained them through speeches, religious ceremonies, patriotic performances and food distribution, while state media portrayed them as evidence of national unity and support for the Islamic Republic.

The phrase “summoned people” echoes remarks Ali Khamenei made before the war, when he said God would mobilize the public during a national crisis and that “the people would finish the job.”

The rallies later became a means of political pressure, with participants chanting against officials involved in negotiations with Washington. Some accused negotiators of betraying those killed in the war and called for talks with the United States to be halted.

Ali Khomeini, a grandson of Islamic Republic founder Ruhollah Khomeini, reinforced that position on Friday, saying negotiations with the United States should not be viewed as a path to peace.

“Negotiation means war; war has different forms,” he said, adding that anyone seeking peace with Washington was a traitor.

The gatherings have also highlighted the government’s shifting approach to women without the mandatory hijab. While some clerics criticized their presence, other officials welcomed them as part of a broader pro-government front.

Mojtaba Khamenei has not been seen in public since the war began, including after his father’s death, the announcement of his succession and Ali Khamenei’s burial. His positions have so far been conveyed only through written statements.

The International Monetary Fund expects Iran’s economy to contract by 6.1% in 2026, after an estimated decline of 1.5% last year. Average consumer-price inflation, already above 50% in 2025, is forecast to accelerate to 68.9%.

The combination matters more than either number alone. A recession means the economy is producing less, companies are selling less and opportunities for work and investment are narrowing. Inflation approaching 70% means the income that remains loses value at extraordinary speed.

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  For many Iranians, paychecks now barely cover food

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  Iran’s economic pain deepens as factions trade blame

For Iranian households, the result is a squeeze from both directions: fewer ways to earn money and far less purchasing power once they receive it.

The scale of the deterioration is also visible in the IMF’s revision. Only three months earlier, it had expected Iran to record modest growth of about 1.1%. It has now cut that estimate by 7.2 percentage points, one of the sharpest downgrades in the report.

“Growth in Iran in 2026 is revised downward by 7.2 percentage points, relative to January, to –6.1 percent,” the IMF said.

The fund links the reversal to damage to energy and transport infrastructure, diminished production and exports, and disruption around the Strait of Hormuz. It places Iran alongside Iraq, Qatar, Kuwait and Bahrain among the regional economies most directly exposed to the conflict.

The downturn is expected to reach the labor market. Unemployment is forecast to rise from 8% to 9.2%, though that figure captures only part of the pressure in an economy where informal work, underemployment and falling real wages are widespread.

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The inflation data are even more severe. The IMF forecasts average inflation of 68.9% over the year and an end-of-year rate of 48.7%. The difference suggests the pace of price rises may slow later in the year, but not enough to restore anything resembling price stability.

It also means that a lower inflation rate would not make goods cheaper. Prices would still be rising rapidly from an already much higher base, leaving food, housing and other essentials increasingly beyond the reach of households whose wages have failed to keep pace.

The regional comparisons make Iran’s position clearer. Saudi Arabia and the United Arab Emirates are each expected to grow by 3.1%, while Oman is projected to expand by 3.5%. Their inflation rates are forecast at 2.3%, 2.5% and 1.7% respectively.

Qatar and Iraq face even deeper contractions, at 8.6% and 6.8%, largely because of damage and disruption to energy production. But inflation in both is expected to remain close to 3% or 4%. Iran’s particular crisis is that it combines a wartime recession with an inflation problem that was already deeply entrenched before the fighting.

Türkiye offers another useful comparison. It has struggled with years of high inflation, yet the IMF still expects its economy to grow by 3.4% in 2026 while inflation averages 28.6%. Iran’s inflation rate is more than twice as high, while its economy is moving sharply in the opposite direction.

Iran’s external position is also weakening. The current account – the broad measure of money flowing into and out of the country through trade and other transactions – is expected to move from a surplus of 0.6% of GDP to a deficit of 1.8%.

For a major oil and gas producer, that reversal points to lost export earnings, damaged production and less access to foreign currency. By contrast, the UAE is expected to retain a surplus of 11.4%, Qatar 11% and Oman 7.5%, giving those governments far larger financial cushions.

The figures should still be treated with caution. The IMF’s Iran data depend partly on national accounts, inflation and balance-of-payments information supplied by the Islamic Republic’s finance and monetary institutions. The fund also uses staff estimates where complete information is unavailable and says the timeliness, accuracy and completeness of its database cannot be guaranteed.

That makes the report an informed estimate, not an independent audit of Iran’s economy. Official statistics under the Islamic Republic are often delayed, incomplete or shaped by a system with several exchange rates and limited transparency.

The IMF itself uses the NIMA (an acronym for integrated system of foreign exchange) trade-related rate to convert Iranian GDP into dollars from 2018 onward, rather than the official rate that is lower, because it considers NIMA more representative of transactions.

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  Inside Iran’s maze of multiple exchange rates

Even that does not fully reflect the much weaker market rate experienced by many Iranians because it still overstates the rial’s value compared with the open market: the dollar is about 1.48 million rials at the NIMA rate today, against roughly 1.78 million rials on the street, a gap of about 21%.

South Pars carries the shock beyond Iran

The damage is not confined to Iran. The IMF says strikes on the South Pars gas field sharply reduced the prospect of a quick recovery in regional gas supplies and were followed by Iran’s attacks on Persian Gulf energy facilities, including Qatar’s Ras Laffan complex.

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  Iran’s energy growth slows to a crawl as demand races ahead

European benchmark gas prices rose 61% between August 2025 and March 2026, while Asian LNG prices jumped by more than 80%. Asia is particularly exposed because more than three-quarters of LNG shipments passing through the Strait of Hormuz are bound for Asian markets.

The IMF’s central forecast still assumes a relatively short conflict and a gradual restoration of production and transport. Under that assumption, global growth slows to 3.1% and inflation rises to 4.4%. But the report says a longer disruption could push global growth close to 2% and inflation toward 6%.

The same warning applies more acutely to Iran: the forecast contraction of 6.1% is not a worst-case estimate, but one built on the assumption that the war’s economic damage begins to ease.

While the government continues to provide monthly cash subsidies and electronic food vouchers to a large share of the population, many families say these measures no longer come close to covering rapidly rising living costs.

An analysis by economic news website EcoIran comparing official food prices, a minimum nutritional basket and the minimum wage found that the salary of a married worker with one child is now enough to cover little more than the minimum monthly food needs of a three-person household.

The analysis estimated that an individual needed around 78 million rials in June to meet minimum nutritional requirements.

For households relying solely on the minimum wage, it found that almost all monthly income would be consumed by food purchases alone, leaving little for rent, utility bills, transportation, healthcare, education or clothing.

Unrelenting inflation

The squeeze comes as many Iranian families already spend between 50% and 70% of their income on housing costs.

Food prices have continued to climb sharply, with staples including red meat, poultry, dairy products, rice, eggs, cooking oil, fruit and vegetables increasingly out of reach for many households.

According to data cited from the Statistical Center of Iran, annual inflation currently stands at about 66%, while year-on-year inflation has jumped by roughly five percentage points over the past month to exceed 88%.

Food and beverage inflation has climbed above 130%, with some categories recording even sharper increases. Prices of red meat and poultry have risen by nearly 180% compared with a year earlier, according to Iranian market reports, causing demand to fall significantly.

Many Iranians say their personal experience of inflation is significantly worse than official figures suggest.

Economists note that inflation indexes measure a broad basket of goods and services, while lower- and middle-income families spend a much larger share of their income on essentials such as food, rent, transportation and medical care.

Dwindling middle class

Economist Kamran Nadri told Tejarat News that years of sustained inflation have inflicted lasting damage on household finances.

“Economic pressure on low-income groups and the middle class may be tolerable for a short period, but when it persists for years, it leaves broad social and economic consequences,” he said.

“Since 2018, following the United States' withdrawal from the nuclear agreement, Iran has experienced average annual inflation of around 40 to 45 percent,” Nadri said. “During that period, wages did not increase in line with inflation under successive governments, and the purchasing power of the middle class has declined markedly.”

Economists caution that even if Iran reaches an agreement with the United States and the risk of military conflict subsides, inflation is unlikely to fall quickly.

Political economy researcher Kamal Athari told ILNA that even under the most optimistic scenario—including sanctions relief and removal of obstacles such as Iran’s inclusion on the Financial Action Task Force (FATF)—it would still take years for Iran to restore normal commercial relations with the global economy.

“Under such circumstances, inflation could eventually decline, but the process would not be rapid,” he said.

‘It’s all on Pezeshkian’

Growing concern over living standards has prompted renewed calls for additional government support.

Mohsen Bagheri, a board member of the Tehran Islamic Labour Councils' Coordination Council, told Khabar Online that wages, which were set in early April, should be revised upward in the coming months.

He also argued that the value of electronic food vouchers should increase, saying they have remained unchanged despite rising prices and earlier government promises.

The economic pressure has also become part of the wider battle over Iran’s political direction after the war.

Hardline critics who continue to advocate confrontation with the United States and Israel have blamed President Masoud Pezeshkian’s administration for the deteriorating situation.

“Pezeshkian destroyed the country,” one hardline user wrote on X. “He created limitless inflation. He allowed us to be deceived by the enemy three times. Zero achievements, countless losses.”

Others have pushed back, arguing that continued calls for confrontation ignore the country’s worsening economic reality.

“Families are literally being destroyed, education, healthcare, housing, inflation, employment, and every economic indicator point to a bleak future,” one user wrote. “Yet some profiteers have forgotten the suffering of the people and keep calling for more war.”

Outlets from different political camps are warning of mounting pressure from inflation, falling purchasing power, unemployment and infrastructure failures, even as they sharply disagree over who is responsible.

Independent and reformist-leaning publications such as Sharq, Etemad and Tose’e Irani have focused on the rising cost of basic goods, reporting that food prices have surged far beyond wage growth.

They point to basic commodities such as bread, poultry and vegetable oil rising between 130% and more than 200%, while wages cover only a fraction of estimated household costs.

Even outlets close to the government, including ILNA and Etemad, have highlighted the growing gap between income and survival, noting that the minimum wage of around 16.6 million tomans covers less than 40% of the estimated 45-million-toman basic subsistence basket for an average family.

Beyond inflation and market instability, Iranian media have also focused on a worsening infrastructure crisis.

Severe rolling summer blackouts have returned, disrupting factories, increasing pressure on businesses and making daily life harder during peak heat.

The search for blame mirrors Tehran’s broader political divisions.

Moderate and reformist outlets such as Sharq, Etemad and Arman Melli emphasize structural failures, isolation and the economic toll of years of confrontation.

They argue that sanctions, conflict, damaged infrastructure and policy failures have intensified pressure on the economy.

Some commentators have warned of an “inflation bomb” and questioned whether decision-makers understand the “accumulation of public dissatisfaction.”

Earlier this week, Jahan Sanat published industrial analyst Alireza Mahdiyeh’s commentary under the headline “The sound of an inflation bomb,” citing Central Bank figures that he said showed the economy facing one of its worst periods in decades.

“Inflation has now reached even the price of bread,” he wrote. “Bread is still available, but more expensive than before. Yet inflation in bread does not give the baker more bread. It only means that what reaches people’s tables is smaller and less than before.”

Moderate outlets have also pointed to domestic policy decisions, including severe internet restrictions and blackouts, arguing they have damaged the digital economy and created widespread “hidden unemployment.”

Hardline dailies Kayhan and Resalat offered a different diagnosis, placing responsibility on the United States and Israel.

They argue that Washington’s declaration that the June interim agreement is “dead,” combined with renewed military pressure, proves that Western economic warfare is driving instability.

These outlets have also accused “economic saboteurs,” domestic speculators and merchants of manipulating currency markets and hoarding essential goods.

The proposed solutions reveal two competing visions for Iran’s future.

Hardliners have called for a “resistance economy,” including tighter controls on markets, action against price gouging and expanded rationing networks.

Moderate economists and commentators writing for outlets such as Donya-ye-Eghtesad argue that internal crackdowns cannot solve deeper structural problems.

They say economic stability depends on reducing tensions, restoring international trade, easing restrictions on businesses and creating conditions for investment and reconstruction.

But optimism remains limited as the damaged diplomatic process between Tehran and Washington offers little immediate relief.

As economist Mehdi Pazouki told reform-leaning Fararu, further escalation could push the country into even more dangerous territory.

“If Israel’s warmongering policies and the hardline approaches of certain actors inside Iran intensify, there is a serious possibility that we will move toward hyperinflation and the dollarization of the economy,” he said.

The message had been set in advance by the Friday Prayer Policy Council, which announced that weekly services nationwide would become “Fridays of Blood Vengeance and Revenge” until those blamed for Khamenei’s killing were punished.

The council said revenge was not an emotional response but a “strategic” and religious duty, explicitly naming US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu.

“Carrying out retribution against the principal criminals – particularly the criminal Trump and the child-killing Netanyahu – is an unchanging element of divine justice,” its statement said.

• 

  Revenge becomes Iran's language of unity after Khamenei’s death

It went further, saying every person or group with the ability to act had a duty to “rise for jihad” and carry out the task without delay. The council said banners calling for vengeance for Khamenei would remain beside Friday prayer pulpits until retribution was achieved.

The language was repeated across major cities.

In Mashhad, where Khamenei was buried, Friday prayer leader Ahmad Alamolhoda said retaliation must be seen by the public rather than remain an unfulfilled promise.

“Revenge and blood vengeance for the martyred leader must remain before the eyes of the people, and the people must see it with their own eyes,” he said. “Only then will real revenge have been taken.”

Saeed Jalili, the Supreme Leader’s representative to the Supreme National Security Council, told worshippers in Mashhad that revenge was a national right and a responsibility for officials.

“If you say Iran’s assets must be released, the greatest asset of our nation was its beloved leader,” Jalili said. “Today, the nation’s right is to defend this great asset through revenge, and it is the duty of officials to pursue it.”

Bushehr’s interim Friday prayer leader Yousef Jamali said worshippers would continue chanting for revenge until the United States and Israel were punished.

“We will stand alongside the officials and the armed forces and, God willing, bring the White House down on its occupants,” Jamali said. “Know that the sword of our revenge will fall upon the oppressors.”

In Rasht, cleric Rasoul Falahati linked revenge to the dispute over the US-Iran memorandum and navigation through the Strait of Hormuz.

“Negotiating in the middle of a war is meaningless,” he said. “Under the recent understanding, we opened the Strait of Hormuz, but America fulfilled none of its commitments and instead moved to further reinforce its bases.”

He said Muslims and “free nations” around the world were ready to take revenge on Trump and Netanyahu and urged Iran’s armed forces to respond firmly to any further US action.

Tehran Friday prayer leader Mohammad Hassan Aboutorabi Fard also accused Washington of violating the memorandum and rejected any US role in the strategic waterway.

“We explicitly declare that under no circumstances will the United States be allowed to interfere in the affairs of the Strait of Hormuz,” he said.

In Qom, Alireza Arafi described revenge against those who carried out and ordered Khamenei’s killing as a legal and religious right that would not be forgotten.

Shiraz interim Friday prayer leader Adel Hajipour used almost identical language, saying the destruction of those responsible was a public demand.

In Malayer, Mohammad-Ali Arzandeh said Friday prayers would remain “Fridays of revenge and blood vengeance” until Israel was destroyed and those blamed for regional insecurity were eliminated.