Iran economists say war is turning malaise into crisis

The unusually candid warnings came at a two-day economic conference in Tehran that brought together senior economists, policymakers and business leaders after being postponed three times because of regional instability and wartime conditions.

Speakers said the latest escalation with Washington had transformed discussions from long-term reform into managing an economy under renewed military pressure.

Former presidential adviser Masoud Nili delivered one of the starkest assessments, warning that Iran's economy was moving from a chronic but manageable malaise into an active crisis.

Years of structural mismanagement, he said, were now visibly breaking open, while inflation had entered a "more slippery phase" in which subsidies and social safety nets were no longer sufficient to protect household welfare.

Media coverage reflected the divide between government officials seeking to reassure the public and independent economists warning that structural weaknesses were becoming harder to ignore.

Economic daily Donya-ye-Eghtesad listed chronic inflation, weak and unstable growth, persistent budget deficits, foreign-exchange volatility, dual exchange rates, pension-fund insolvency, foreign-policy pressures and rising geopolitical risks among the country's most urgent challenges.

Economist Mehrdad Sepahvand, one of the conference organizers, said the event had been delayed three times because of the regional crisis.

Investment gap

Former Central Bank Governor Hossein Abdoh Tabrizi argued that banking reform was essential, saying financial institutions must become "efficient allocators of capital rather than money-printing engines."

Although public confidence in the banking system had held up during recent regional conflict, he said, deeper reforms were needed to channel savings into productive investment.

Economist Mohammad-Mehdi Behkish said rebuilding damaged infrastructure, restoring economic growth and modernizing industry would require about $500 billion in investment.

Domestic resources alone were nowhere near sufficient, he argued, making greater foreign engagement and integration into the global economy indispensable.

Alireza Bakhtiari, director of the Donya-ye-Eghtesad Media Group, said policymakers remained trapped between what he described as a "survival paradigm" and a "growth paradigm," arguing that many of Iran's domestic economic constraints could not be resolved without major foreign-policy decisions.

Government response

Government-linked outlets focused instead on Central Bank Governor Abdolnaser Hemmati, who acknowledged the severity of the economic situation while urging against panic.

Hemmati cited Iranian and international data showing a 47 percent decline in real per-capita income, saying the purchasing power of the average Iranian had fallen to levels last seen in the late 1990s.

Calling for "realism without doom-mongering," he argued that neither denial nor exaggeration would improve the economy.

"Price stability alone doesn't create goods," he said. "Only investment and productivity can sustainably restore Iranians' purchasing power."

Inflation pressures

Independent economists painted an even darker picture.

Hossein Tavakolian warned that inflation was entering a more dangerous phase.

Monthly inflation, once around 3 percent and equivalent to roughly 40 percent annually, was now periodically reaching 10 percent, he said, with nearly every major consumer category entering what he described as "red zones."

Academic economist Teymour Rahmani argued that inflation in Iran was fundamentally a political and fiscal problem rather than simply a monetary one.

Although direct government borrowing from the central bank had been curtailed, he said, fiscal pressures had merely shifted onto commercial banks, postponing rather than solving the country's inflation problem.

Pakistan and Qatar urged Tehran and Washington on Monday to halt hostilities and resume implementation of a previously signed memorandum of understanding.

Iranian Interior Minister Eskandar Momeni traveled to Islamabad on Monday carrying a message from President Masoud Pezeshkian as part of the mediation effort. Regional media reported he was also expected to meet Pakistan's army chief, Field Marshal Asim Munir.

According to Israel's Channel 14, Qatar proposed that the United States suspend further military strikes while Iran reopens both the northern and southern shipping lanes through the Strait of Hormuz for a 10-day period. The proposal has not been independently verified.

Tehran confirms new proposals

Foreign Ministry spokesman Esmail Baghaei confirmed during his weekly press briefing that Iran had received new proposals from mediators aimed at ending the confrontation, although he did not disclose their contents.

His remarks marked Tehran's first public acknowledgment that fresh diplomatic initiatives were under consideration following the latest escalation.

President Masoud Pezeshkian also defended both the memorandum of understanding and the prospect of diplomacy during remarks to the Supreme Judicial Council, rejecting accusations that Iran had compromised its national interests.

"Not only was no concession made against the country's interests, but Iran achieved major gains, and there is not a single provision that creates a one-sided benefit for the United States," he said.

"If economic pressure leads to growing social discontent, the tremendous social capital that people have created in support of the system could be damaged."

Political analyst Hossein Ghatib argued that diplomacy should remain an option despite the fighting, but warned against any temporary ceasefire that merely postponed another round of conflict.

"The next agreement should not be based on concessions before guarantees," he wrote on X. "Instead, it should rest on the principles of guarantees before concessions, verification before trust, and concrete action before the next step."

Fighting continues

The diplomatic activity unfolded against a widening military campaign across Iran and the Gulf.

Iran launched additional missile and drone attacks targeting Kuwait and Bahrain, while a Greek shipping company said two tankers under its management had been struck by unidentified projectiles while transiting Omani coastal waters.

Iranian media also reported attacks in East Azerbaijan, West Azerbaijan and Bushehr provinces, followed later in the day by a strike on the Shiraz Electronics Industries complex.

Iranian Army spokesman Mohammad Akraminia said "reason dictates that the war continue until it creates complete deterrence for Iran."

He also warned that "any country cooperating with the Americans will certainly face problems for its ships passing through the Strait of Hormuz."

Parliament Presidium member Rouhollah Motefakker-Azad similarly warned that if the conflict continued, "the Islamic Republic will respond even more aggressively, and then the Americans should think more seriously and more quickly about leaving the region."

‘Pointless domestic divide’

Iranian hardliners nevertheless continued to oppose any return to negotiations.

Conservative political analyst Majid Shakeri argued that Washington should first publicly recommit to the memorandum of understanding and fulfill its obligations under the agreement before any new talks could begin.

Commenters on the conservative Tabnak website likewise dismissed renewed diplomacy, with one describing the situation as a "vicious cycle of war, negotiations, war, negotiations."

The IRGC-affiliated Javan newspaper, however, argued that Iran should remain prepared for either outcome.

"Going to the negotiating table to consolidate the gains achieved in the war and secure lasting security, or continuing to fight for the same objective, should not create a pointless domestic divide."

On the US side, President Donald Trump reposted a Truth Social poll showing majority support among respondents for a peace agreement with Iran while insisting Washington had responded forcefully to the killing of American personnel.

Secretary of State Marco Rubio also reiterated that the United States remained committed to a diplomatic solution despite the ongoing fighting.

"They continue sending signals that they want talks and negotiations," Rubio said. "But we respond to their actions, and their actions are firing missiles and drones at ships."

The debate has intensified since Iran targeted a vessel near the Strait of Hormuz last week, prompting a renewed US military campaign that has included days of strikes on ports, bridges, airports and military facilities across Iran’s southern provinces.

Even as US Vice President JD Vance and Iranian Parliament Speaker and chief negotiator Mohammad-Bagher Ghalibaf have continued to defend diplomacy backed by military preparedness, the fighting has persisted and the prospect of a wider conflict has grown.

The criticism has been directed in part at ultrahardline figures such as Qom Seminary Chancellor Alireza Arafi, who has called for further war against the United States and an end to negotiations.

Two recent commentaries—one by former lawmaker and former National Security Committee chairman Heshmatollah Falahatpisheh, the other by political analyst Abdolrahman Fathollahi—reflect the growing push to hold hardliners accountable for the costs of confrontation.

While one focuses on political responsibility for failed diplomacy, the other highlights the burden borne by communities on Iran’s southern frontier.

‘Defeating diplomacy’

Writing in the moderate daily Toseh Irani, Falahatpisheh accused hardline factions of using what he called a distorted interpretation of religion to obstruct diplomatic opportunities.

“I believe part of these two major wars against Iran was the result of this very definition of religious beliefs by extremists, who are now turning to distorting religion to defeat diplomacy,” he wrote.

He argued that the same factions had repeatedly promised better outcomes while blocking agreements that could have reduced tensions.

“They are the exact same people who blocked two good agreements during the major periods of 2021 and 2022, claiming they would forge a better deal,” he wrote. “But in practice, not only was no agreement achieved, but two major wars were imposed on Iran.”

Falahatpisheh called for the prosecution of those he said had turned diplomatic opportunities into military conflict.

‘Patriotism from a safe distance’

A second commentary, published Thursday in Shargh, shifted the focus from political responsibility to the human cost of confrontation.

Under the title The Country’s Future and the Triangle of Extremism, Costs, and Responsibility, Fathollahi warned about the toll of intensifying US airstrikes on Iran’s southern coastal provinces.

He pointed to public campaigns calling for outspoken opponents of negotiations to be sent to the front lines, accusing them of practising what he described as “patriotism from a safe distance.”

“One certainly cannot beat the drums of war from the safe margins of the capital behind podiums, while dumping the costs of those decisions onto the people living in the front lines,” Fathollahi wrote, highlighting the plight of communities bearing the brunt of the fighting over the Strait of Hormuz.

The comments come after a week of US strikes on infrastructure across Iran’s Persian Gulf provinces, where dozens have been killed or injured and many more affected by transport disruption, electricity blackouts and water shortages during the height of summer.

For Fathollahi, the question is no longer simply one of military strategy but whether Iran’s leaders are willing to change course before the costs grow even higher.

“Rethinking certain political approaches and utilizing all expert and diplomatic capacities is not a choice,” he concluded, “but a necessity to safeguard national interests and reduce the costs imposed on society.”

Both men appeared to be making the same argument to critics within their own political camps: that diplomacy is most effective when backed by credible military force, not pursued instead of it.

The parallel messaging prompted analysts to suggest that, despite rising tensions, both sides may still view diplomacy as preferable to war.

International relations analyst Amir-Ali Abolfath wrote on X that Ghalibaf's statement, Vance's remarks and Iran's release of an Iranian-American prisoner together offered "a glimmer of hope" that both sides could return to managing tensions within the framework of an agreement "whose fate hangs by a thread."

Reform-leaning news website Rouydad24 likewise described the prisoner's release as evidence of "the opening of an important diplomatic channel amid an exchange of fire."

US President Donald Trump also welcomed the move, writing on Truth Social that "the United States appreciates this gesture of goodwill by Iran."

‘Talking is not compromise’

Ghalibaf issued a public statement on Wednesday defending what he described as the course pursued under Supreme Leader Mojtaba Khamenei's guidance, arguing that negotiations with the United States remain compatible with military preparedness and resistance.

Rather than presenting diplomacy and military readiness as opposing choices, he argued they were complementary tools for safeguarding Iran's national interests.

"War and negotiation are two methods of protecting the national interest," he said, insisting that negotiations are "part of safeguarding national interests, not synonymous with compromise."

He warned that treating either military confrontation or diplomacy as the sole solution would amount to "a strategic mistake," adding that officials have a duty to prepare "for war, diplomacy, or both," depending on the course set by the Supreme Leader.

"We must stand firm on the achievements secured through the MoU until the nation's rights are fully realized," he wrote.

Hours later, Vance struck a remarkably similar tone in an interview with podcaster Joe Rogan, rejecting the idea of overthrowing Iran's government through US military force.

He argued that diplomacy, backed by military pressure, remained the preferred way to manage the crisis, and criticized "warmongers" pushing for conflict.

A well-funded covert campaign, Vance claimed, was seeking to derail negotiations and any agreement with Tehran.

Hardliners push back

The renewed defense of diplomacy triggered an immediate backlash from Iran's hardline camp, where many have argued since the recent military confrontation that the Tehran-Washington understanding should be formally declared dead.

Kamran Ghazanfari, a member of parliament, accused President Masoud Pezeshkian and Ghalibaf of lacking the courage to acknowledge that the agreement had collapsed.

"Whether they call it war or not, the third war has effectively begun," he said, arguing that the negotiating team should publicly admit that talks had reached a dead end.

Hardline journalist Davood Modarresian likewise criticized Ghalibaf's statement, saying it contained "no sign of change or apology" and faulting him for continuing to advocate negotiations despite what he described as Washington's abandonment of the agreement.

Hardline political activist Masoud Barati challenged Ghalibaf's description of negotiations as a form of struggle.

"Calling negotiations a form of struggle gives primacy to negotiations," Barati wrote. "If negotiations have failed to secure Iran's achievements, why insist on continuing this approach?"

Conservative rivalry deepens

The latest dispute reflects a long-running rivalry between Ghalibaf and former nuclear negotiator Saeed Jalili, both prominent figures within Iran's conservative establishment.

In recent months, lawmakers aligned with Jalili and members of the ultraconservative Paydari Front have intensified criticism of Ghalibaf, arguing that negotiations with Washington should be abandoned altogether.

Their influence, however, appears to have weakened after losing two key leadership positions on parliament's National Security and Foreign Policy Committee.

Adding to signs of growing pressure on the hardline faction, lawmaker Majid Nasrpour told Khabar Online in comments published Thursday that "some hardline members of parliament have been summoned by the relevant authorities and seriously warned over their remarks."

The document, titled "What Iran Wants" and obtained by IranWire, was written by Ali Rabiei, a former intelligence ministry official and government spokesman who now advises President Masoud Pezeshkian on social affairs. It is built on a survey conducted in April and May by the ARA research center and was circulated among senior officials in June.

Its timing matters. The survey was taken in the aftermath of the January protests, in which security forces killed tens of thousands of demonstrators within days, and during a war with the United States that has already claimed the life of Supreme Leader Ali Khamenei. Through all of it, state television has filled its evenings with images of packed squares and chants of revenge.

The report is the government's private mirror, and it shows something else entirely. Given four options for the country's future, only nine percent of respondents chose keeping things as they are; the rest split between reform, deep reform, and changing the system outright.

The document discloses no methodology, and official polling in Iran is conducted among respondents who have every reason to fear giving an honest answer to a state questionnaire.

Sociologist Saeed Paivandi, who reviewed the full report for IranWire, called its findings broadly plausible despite those gaps. In practice, that means each figure below is best read as a floor, not a ceiling. Whatever the government's own instrument records, the reality is unlikely to be milder.

The angriest country ever measured

The report's starkest finding is a number without precedent. Gallup's global emotions index has never recorded a national anger rate above 47 percent, a figure that belonged to Chad. Rabiei's survey puts Iran at 63.6 percent, up twelve points since December, the month before the massacre.

The document itself acknowledges the record, placing Iran above every country Gallup has measured for both anger and grief.

Iran had appeared in those global rankings before, alongside war-scarred states like Iraq and Afghanistan. It has now left them behind.

No war, no surrender

On the confrontation with Washington, the surveyed public fits neither of the stories told about it: the nation baying for battle that state television broadcasts, or the one ready to capitulate that some in Washington count on.

Asked the best course in the current crisis, 44.3 percent chose preserving the ceasefire and continuing negotiations, roughly double the share that favored ending the talks and preparing for war.

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  As Tehran debates, Iran's south lives the war

Barely one in ten would accept all American conditions, and about two-thirds oppose a complete shutdown of uranium enrichment.

Yet this is not trust in the men at the table. Fewer than a third of respondents expressed high confidence in Iran's new negotiating team, and nearly half the country reports serious fear of another round of war.

What emerges is a population that rejects both another war and a capitulation, and trusts neither the diplomats nor the generals conducting either.

A society in freefall, and the myth of the rallying nation

The emotional data reads like a casualty report. Half the country reports hopelessness, up eight points since December.

Nearly 48 percent report sadness and depression, 45 percent chronic fear and anxiety. Despair runs highest among the young and the educated, the very people a state would need to rebuild anything.

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  Hardline rallies turn Iran’s streets into pressure front against US talks

The same pages quietly dismantle the leadership's central wartime claim: that the nation has closed ranks behind it.

By the government's own count, 47 percent of Iranians never attended a single one of the nightly wartime rallies that state television presents as proof of unity. In Tehran, 61 percent stayed away.

Rabiei concedes that a much-promoted volunteer registration drive for national defense underperformed, and attributes the reluctance to people's fear of being judged.

It is an official admission that even gestures of patriotism have become politically fraught. The report's own data explains why: Iranians overwhelmingly separate defending their country, which a majority say they would do if attacked again, from defending the Islamic Republic.

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  Iran faces region’s harshest mix of wartime contraction and inflation

Proud, secular, and packing

The most quietly radical section concerns who Iranians say they are. National pride is rising. More than 85 percent express pride in being Iranian, and the share who identify first as "Iranian" rather than "Iranian Muslim" has grown since the war, most sharply among the young.

Religious observance, the Islamic Republic's ideological foundation, is collapsing under the same roof.

In 1975, four years before the revolution, 79 percent of Iranians said they fasted through Ramadan. By 2023 it was 42 percent. This year it is roughly 30.

And the pride does not translate into staying. A third of Iranians say they would emigrate if they could, including nearly half of everyone under thirty and half of the university-educated. People are not leaving Iran, the report effectively concludes; they are leaving its future.

A manual for management

What makes the document remarkable is less its data than its purpose. Rabiei's recommendations to the leadership contain no political change at all.

Officials should do a better job convincing people that sanctions, not mismanagement, caused their misery; state television should show a more inclusive face; the ration cards should continue. This, even as the report's own respondents name official incompetence, ahead of sanctions, as the main cause of their problems.

One recommendation stands out: state bodies should avoid policies that put them in confrontation with society.

That instruction has a visible form on Iran's streets, where enforcement of the small rules of daily life has gone relatively quiet. Many Iranians read the leniency less as tolerance than as triage, a state conserving its strength for a collision it can see coming.

Independent surveys suggest the private picture is, if anything, generous. The Netherlands-based GAMAAN institute, polling Iranians beyond the reach of official questionnaires, has found large majorities opposed to the Islamic Republic's continuation altogether.

Rabiei reaches for an older vocabulary to describe what his numbers show: a society trapped in the present, unable to desire its past or picture its future. The term he borrows, "presentism," was coined by an Iranian scholar to describe the national mood in 1975.

Four years later, that society produced a revolution.