Is Iran's middle class being pushed into poverty?

In Iran, the impact of war on the middle class is becoming increasingly apparent, with many families struggling to make ends meet. Mina, a housewife, reveals that everyday essentials such as red meat have become luxuries they can no longer afford, replaced by more expensive alternatives. The International Monetary Fund predicts a 5.4% contraction in Iran's economy this year, while inflation is expected to reach nearly 69%.

The World Bank warns that conflict, trade disruptions, and uncertainty are severely affecting the country's economic health.

Economist Ahmad Alavi, based in Sweden, emphasizes that Iran did not create its economic crisis but rather intensified it. Iran entered the conflict with high inflation, a weakening currency, and chronic budget deficits. The war exacerbated these issues through infrastructure damage, trade disruptions, internet shutdowns, and rising inflation expectations.

Food prices have surged, with bread and cereals increasing by 140%, meat and poultry by 135%, dairy products by more than 116%, and edible oils by over 200%. As a result, many families are cutting back on essentials like meat, postponing medical treatment, and postponing savings.

Economists agree that while lower-income households have been hit hardest, the middle class is also facing financial difficulties. Many salaried workers and pensioners have slipped below the poverty line due to stagnant incomes that cannot keep pace with inflation. The private sector, too, is grappling with the fallout. Morteza, an Iranian trader, notes that regional trade routes have shifted due to difficulties in shipping through the Strait of Hormuz.

While China has stepped in to fill some of the gap, the shift has not benefited Iranian traders, as the collapse of the rial and soaring inflation continue to hinder market growth.

Despite higher global oil prices, Iran is unlikely to see significant benefits due to ongoing sanctions, export restrictions, and higher transport costs. Government measures such as subsidies, price controls, and foreign exchange market interventions may provide temporary relief but are unlikely to address the underlying structural problems.

Alavi argues that without restoring confidence, reducing sanctions, and addressing structural issues, these policies remain short-term responses rather than lasting solutions. He warns that uncertainty itself has become a significant barrier to economic recovery, causing businesses to delay investments and households to become increasingly cautious about spending.

Unless inflation eases, the exchange rate stabilizes, and trade conditions improve, many households are expected to remain under financial pressure even if military tensions subside.