BY: Shatha Kalel
The June 2025 12-day war between Iran and Israel has left deep marks on both nations’ economies, echoing past Middle Eastern conflicts in its symbolic undertones and far-reaching consequences. While a fragile ceasefire brokered by US President Donald Trump holds for a second day, analysts warn that the damage runs deeper than infrastructure and military losses—it strikes at the economic foundations of Iran itself.
Historical Context: A Legacy of Economic Pressure
Iran’s economy has faced sustained strain for decades. Following the 1979 Islamic Revolution, Western sanctions—initially targeting oil exports and later expanding to banking, trade, and technology—created chronic fiscal constraints. The Iran-Iraq War (1980–1988) further drained resources, destroying industrial and energy infrastructure. More recently, sanctions over Iran’s nuclear program have kept foreign investment scarce and limited Tehran’s access to global markets.
Like the Arab-Israeli War of 1967 or the Yom Kippur War of 1973, the 2025 conflict holds symbolic weight. The war began on June 13 and lasted twelve days—linking numerically to Israel’s twelve tribes and Iran’s Twelver Shia tradition. But symbolism aside, the fighting brought very real economic consequences.
War’s Economic Toll on Iran
Already weakened by years of isolation, Iran bore the heavier cost of the conflict. Defence analyst Andreas Krieg estimates the total direct and indirect losses at $24–$35 billion—about 6.3% to 9.2% of its $380 billion GDP.
Key drivers of this economic hit include:
Destruction of Nuclear Infrastructure: US and Israeli strikes targeted sites like Fordow, Natanz, and Isfahan. While President Trump claimed Iran’s nuclear capability was “completely obliterated,” intelligence reports suggest uranium stockpiles remain largely intact.
Collapse in Oil Exports: Energy installations were damaged, and oil shipments faced severe disruptions. As oil accounts for the bulk of Iran’s foreign currency earnings, this hit will prolong fiscal instability.
Infrastructure Losses: Bombing of industrial hubs, ports, and transport routes will delay post-war reconstruction and deepen unemployment.
Iran’s challenges are compounded by its dependence on oil revenue, limited access to international finance, and an already fragile currency.
Wider Regional and Global Impact
The war rippled across the global economy through the Strait of Hormuz—a chokepoint for one-quarter of the world’s oil supply. Even without a full blockade, fears of disruption doubled tanker insurance premiums, sent Brent crude prices up by 15–20%, and forced major shipping companies to reroute vessels, driving up costs.
Agriculture, manufacturing, and other trade-dependent sectors in Asia and Europe faced delivery delays and increased expenses. Airlines were also forced to reroute flights, raising operating costs.
Comparing Costs: Israel and the US
While Israel also endured losses—estimated at $11.5–$17.8 billion—its diversified, high-tech economy and larger financial reserves make recovery more achievable. The United States, though directly involved via “Operation Midnight Hammer,” saw only minimal fiscal impact at $1–$2 billion, though the strategic cost of deeper involvement could be significant.
Long-Term Implications for Iran
For Iran, the war’s economic impact will likely persist for years:
Prolonged Recovery Time: Damaged oil infrastructure means slower revenue rebound.
Rising Internal Pressures: With inflation, unemployment, and sanctions still biting, public discontent may grow.
Reduced Foreign Investment: Ongoing instability deters the partnerships Iran needs for reconstruction.
Iran’s economic story after this war mirrors its history—a cycle of external pressure, internal strain, and resilience tested by conflict. As the ceasefire holds, Tehran faces a familiar challenge: rebuilding under the weight of sanctions, political isolation, and the unpredictable currents of Middle Eastern geopolitics.
Economic Studies Unit / North America Office
Al-Rabetat Center for Research and Strategic Studies