Unraveling Iran’s Economic Crisis: How Conflict with the US and Israel is Fueling Massive Job Losses

A wave of job losses has swept across Iran, driven by rising tensions involving the United States and Israel. Some layoffs came suddenly, others followed in slower waves - but together they have spread across industries, affecting millions of workers and households.

What began as geopolitical pressure has rippled far beyond the front lines, reshaping daily life and economic stability across the country.

Millions Affected by Job Cuts

According to Gholamhossein Mohammadi, Iran’s deputy minister for labour and social welfare, around two million people have lost their jobs due to the ongoing conflict.

The announcement highlights the scale of disruption, with millions of families now facing financial uncertainty.

Online, discussions about layoffs dominate public conversation. While officials and companies often describe the process as “workforce adjustments,” many workers recognize the reality behind the language.

"You can see it from the emptiness of the metro," one user wrote on social media. "My one-and-a-half hour journey took only half an hour," said another.

Reduced traffic, quieter streets, and empty workplaces reflect the broader slowdown in economic activity.

Economic Activity Slows Across Sectors

Consumer spending has dropped sharply. Many people are cutting back on non-essential purchases, avoiding travel, and reducing everyday expenses.

Businesses outside essential sectors, particularly retail and tourism, are seeing fewer customers. At the same time, manufacturing output has declined as supply chains weaken.

Major industrial hubs have been hit hard. Strikes earlier this year damaged key facilities in Asaluyeh and Mahshahr, affecting petrochemical production. Steel producers, including Mobarakeh Steel and Khuzestan Steel, have also suffered disruptions.

These industries support vast networks of jobs. For example, Iran’s automotive sector alone is estimated to sustain around one million positions, many of which are now at risk.

Supply Chain Disruptions and Production Halts

Restrictions on shipping routes and access to international suppliers have made it difficult for companies to obtain raw materials.

An executive from a manufacturing firm in Qom described the situation:

"We cannot even get the material loaded on the ship, as our foreign suppliers are worried that the ship won't be permitted to enter Iranian waters."

In some cases, factories have shut down entirely. One textile plant reportedly reduced its workforce from 600 employees to just 50 after supply lines collapsed.

Other businesses have placed workers on unpaid leave, promising rehiring if conditions improve - though such outcomes remain uncertain.

Internet Restrictions Add Pressure

Government-imposed internet shutdowns, introduced over security concerns, have further strained the economy. Iran’s growing digital sector has been particularly affected.

Each day without internet access is estimated to cost the economy tens of trillions of rials - roughly $350 million. Over the first 52 days of disruptions, losses are believed to have exceeded $1.8 billion.

The impact has been especially severe for women working in informal sectors, many of whom rely on social media platforms to sell goods and generate income.

Rising Inflation and Financial Strain

At the same time, inflation has surged. Official figures show rates exceeding 50% as of March 2026, further eroding purchasing power.

To support struggling businesses, the government has introduced loan programs offering up to 440 million rials per employee. However, high interest rates - ranging from 18% to 35% - raise concerns about long-term debt burdens.

For many companies, the choice is stark: borrow at high cost or reduce their workforce.

Outlook Remains Uncertain

Without a clear resolution to the conflict, economic recovery remains uncertain. Continued restrictions on trade, combined with rising costs and disrupted production, suggest that further job losses may be unavoidable.

Analysts warn that renewed fighting could deepen the crisis, pushing millions more into hardship.

Conclusion

The economic impact of the conflict in Iran extends far beyond immediate political tensions. Job losses, inflation, and supply chain disruptions are reshaping everyday life across the country.

For many, the effects are not measured in headlines or statistics, but in empty factories, silent streets, and uncertain futures.