Average annual inflation has climbed to a record 62%, while year-on-year inflation has surged to 82%, rapidly eroding household purchasing power.
Food prices remain the principal driver of overall inflation, with annual food inflation staying in triple digits for a sixth consecutive month. In July, food inflation reached 134% nationwide and 140% in rural areas. More than two-thirds of the food items monitored by the statistical agency now exceed what economists describe as crisis-level inflation.
Prices have risen sharply across other sectors as well. Household appliances are estimated to cost 114% more than a year ago, while transportation costs have climbed 103%. Economists warn that a possible gasoline price increase could push food inflation even higher by raising distribution and delivery costs.
War or government policy?
Critics of President Masoud Pezeshkian’s government, many of whom also oppose an agreement with the United States, argue that the inflation surge is rooted entirely in domestic economic policy rather than the recent conflict.
Hojjat Abdolmaleki, labor minister under former president Ebrahim Raisi, dismissed any connection between the war and rising prices.
“The war has had no effect whatsoever on inflation. Inflation has risen steadily throughout the Pezeshkian Administration, and the war’s contribution to these price increases is zero,” he said.
“Virtually all of this inflation is the direct result of misguided policies and government incompetence. Even without the war, the situation would have been the same, perhaps even worse.”
Other economists reject that assessment, arguing that both domestic policy and the conflict have driven prices higher.
Mohammad Sadegh-Alhosseini told the Iranian Students News Agency (ISNA) that domestic policies could account for inflation of between 30% and 50%, but that the increase beyond that range was linked to international tensions and the war.
Mojtaba Yousefi, a member of parliament, also said it was inaccurate to claim that the war had no effect on prices. “But it is equally wrong to attribute all inflation to the war,” he said.
Economists also caution that even an agreement between Tehran and Washington, potentially unlocking frozen assets, easing sanctions, increasing oil revenue and reducing inflation expectations, would be unlikely to bring prices down quickly.
They say chronic budget deficits, entrenched corruption and structural inefficiencies are so deeply embedded that reversing them could take years.
Even if the fighting ends, the cost of rebuilding damaged infrastructure and industry would continue to strain public finances. Conservative politician Mohammad-Reza Bahonar recently estimated reconstruction costs at $200 billion.
Purchasing power continues to collapse
The inflation surge has increasingly affected ordinary Iranians. According to a report by the Iranian Labour News Agency (ILNA), during recent months even basic staples such as chicken, eggs and bread have become unaffordable for many working-class households. Bread prices alone have risen by between 100% and 140% on average.
Official data show that prices of at least eight food items have more than doubled over the past year. Cooking oil has risen 261%, while meat prices have increased 145%.
By comparison, ILNA wrote, the minimum wage has increased by only 60%, while salaries for civil servants, pensioners, nurses and teachers have risen by between 20% and 43%, averaging roughly 30%. As a result, many of these households no longer fit the conventional definition of the middle class, the report argued.
Government food vouchers introduced in January have also lost much of their purchasing power, as authorities have left their value unchanged despite soaring food prices.
Ahmad, a retired civil servant in Tehran, said the vouchers initially allowed him to buy around ten food items. "Now I can only afford three or four."
Social media has also reflected the growing financial strain. Users report increasing numbers of people selling, or even renting out, personal belongings such as electronic devices to cover daily expenses.
Journalist Azadeh Mokhtari wrote: "When advertisements for selling hair, or even renting laptops for online classes, become more common, it means the middle class is being worn away, and the lower-income class is being pushed out of the economy."
Misery index reaches new peak
The deteriorating economic environment is also reflected in Iran's misery index, the combined rate of annual inflation and unemployment.
With annual inflation at 62% and unemployment at 9.1% in the quarter ending in June, the misery index climbed to a record 71.1%, up from 64.2% in the previous quarter. The index stood at 56.6% during the same period in 2021.
The economic burden is not evenly distributed across the country. Several provinces have recorded misery index readings above 100%, with Lorestan registering the highest level at 121.5%.
Economists say the figures reflect not only declining purchasing power and weaker job security but also rising uncertainty that makes long-term financial planning increasingly difficult for households.
