Iran's economy has been battered. Its leaders still think Trump will
blink first
[April 28, 2026] By
AMIR-HUSSEIN RADJY, LEE KEATH and SARAH EL DEEB
CAIRO (AP) — In the heartland of Iran’s famed carpet-making industry,
manufacturing has ground to a near halt. Dairies struggle to find
packages for milk and butter. Giant steel mills that once drove Iran’s
economy have gone silent. Hundreds of thousands have lost jobs, and
millions more are at risk.
Over more than five weeks of bombardment, U.S. and Israeli strikes hit
thousands of factories. The damage is reverberating across Iran’s
economy, threatening increasing waves of layoffs, even as Iranians face
skyrocketing prices. The cost of chicken is up 75% the past month, and
beef and lamb jumped 68%. Many dairy products have increased by half.
It could get worse as the United States blockades Iranian ports, choking
off many imports and oil exports that bring in billions of dollars.
Economic woes sparked the mass protests that were crushed before the war
and could again push Iranians into the streets.
Still, Iran has its own weapon pointed at the global economy, with its
grip on the Strait of Hormuz. Iran’s leaders say they will only reopen
the key waterway for global energy if the blockade is lifted and the war
ends. They are betting that an economy built to be self-reliant under
decades of international sanctions can endure the pain longer than U.S.
President Donald Trump.
Iran has lost at least 1 million jobs directly because of the war,
Deputy Labor Minister Gholamhossein Mohammadi said, according to state
media.
But the ripple effects put some 10 million to 12 million jobs at risk —
half of Iran’s labor force — warns Hadi Kahalzadeh, an Iranian
economist.
Steel and petrochemical production crippled
Israel claimed to have struck the industrial base of Iran's paramilitary
Revolutionary Guard. But the strikes went well beyond, hitting
facilities not owned by the force.
Airstrikes damaged 20,000 factories, some 20% of the country’s
production units, according to Kahalzadeh, a research fellow at Brandeis
University. The stricken facilities included Tofigh Daru, Iran’s largest
pharmaceutical holding, producing anticancer drugs among other things.
Optics and chemical developers, and aluminum and cement factories, were
also hit.
Perhaps most damaging, Israel hit Iran’s biggest steelmaking and
petrochemical factories, most of them in a wave of strikes just before
the April 8 ceasefire. The two biggest steel producers, Mobarakeh Steel
and Khuzestan Steel, as well as smaller mills, halted production. More
than 50 petrochemical complexes have been shut down, according to Iran’s
semiofficial Jamaran news agency.
That has crippled Iran’s two biggest non-oil exports, and higher prices
have affected everything from plastics to pipes, to fabrics and
packaging for groceries like milk, butter and cheese.
Strikes are not the only cause of economic woes. The internet has
largely been shut down since the protests, gutting small and
medium-sized businesses reliant on online sales. Even before the U.S.
blockade, Iranian strikes on the United Arab Emirates, on which it
relied for around a third of its imports, led that country to cut off
trade.
Ripple effects
Around 80% of rug and carpet manufacturers have stopped operations in
the industrial zone of the city of Kashan, the center of Iran’s
rugmaking industry, said the son of a rugmaker. His family factory,
which employs 20 to 30 people and used to machine-make hundreds of rugs
a month, is among those that shut down, though his father still goes to
the facility every day.
“Never have I heard my father so upset,” said the son, who lives in the
United States and spoke on condition of anonymity for his family’s
security.
Kashan, home to hundreds of carpet manufacturers, “relies on the rug
industry and unfortunately it’s been crippled,” he said. Exports
plummeted since the war began, and domestic sales are almost zero.
Prices for synthetic fibers have leaped 30%- 50% — partly a downstream
effect of hits on petrochemical facilities, he said.
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People conduct their businesses around the traditional grand bazaar
of Tehran, Iran, March 29, 2026. (AP Photo/Vahid Salemi, File)
 Mehdi Bostanchi owns a ventilation
and air conditioning factory, and a second producing household fans,
with a total of more than 1,130 employees. Both still operate. But
the HVAC factory heavily depends on the construction industry, and
“construction is facing a massive shock,” he said.
Most new building is on hold, while the price of iron sheeting has
more than doubled.
Bostanchi, a member of a council representing Iranian
industrialists, said “all the country’s industries in some way rely
on our petrochemical industry.” Even companies that don't directly
need steel or petrochemical products have contracts with those that
do.
A chemical engineer working at one of Iran’s biggest private
construction contractors said it laid off half of its 180
headquarters staffers and had to shut down a project with Mobarakeh
Steel, costing 1,000 jobs.
A Tehran resident quit his job as a consulting engineer just before
the war, and the new job he had lined up is now uncertain.
“I am at the top 1% (of society), and I am without a job. I am super
worried about my future,” he said, adding that people’s savings will
start to run out in the coming weeks.
Both he and the chemical engineer spoke on condition of anonymity
out of security concerns.
Projecting resilience
Millions took to the streets in January's protests that were
triggered by worsening inflation but turned into calls for the end
of the Islamic Republic, bringing a bloody crackdown.
Officials are trying to reassure the public that Iran can withstand
the economic pain. The government has promised to increase
unemployment insurance. But the burden on Iran's social security
system is rising even as its funding is gouged, since it depends
heavily on its stakes in petrochemical companies and other key
industries, Kahalzadeh said.
The U.S. blockade threatens to cut off export revenues: Iran sold
some $98 billion in exports in 2025, just under half of it from oil.
But a complete blockade is difficult; around half of Iran’s non-oil
trade goes overland or through Caspian Sea ports, according to
Esfandyar Batmanghelidj, an economic expert.
Iran has also built up significant resilience and “readiness for
worst-case scenarios,” Batmanghelidj wrote for the Bourse and Bazaar
Foundation, a research group he heads on economic development in
West and Central Asia.
Iran maintains large reserves of vital supplies. At the end of 2025,
Iran had stored up enough electrical machinery for nearly eight
months, cement to last nearly six months and enough steel and iron
for four months, he wrote, adding that supplies could be further
stretched by rationing.
Bostanchi, the factories owner, said he believes Iran's economy
could bounce back once the war ends. But how much depends on whether
Iran can win an end to international sanctions.
“If we cannot lift the sanctions in any agreements, then no, the
optimistic forecast … will not happen,” he said.
___
El Deeb reported from Beirut.
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