Iran economy downturn deepens amid inflation, shutdown

Iran’s economy is sliding into a sharper downturn as inflation rises and business activity remains weak, even after a temporary pause in hostilities involving the United States and Israel. Officials and merchants cited a combination of damage to civilian infrastructure, ongoing international sanctions, and a near-total internet shutdown as key pressures weighing on day-to-day commerce and employment.

 

In Tehran, signs of reopening appeared at the Grand Bazaar, one of the country’s most important commercial centers. On Saturday, April 5, 2026, more shops were open and operating for longer hours following a ceasefire. Merchants, however, said customer demand and sales volumes stayed far below pre-conflict levels, underscoring how quickly confidence and purchasing power can erode during periods of disruption.

 

Traders also reported that prices for goods have climbed sharply since late January 2026. According to merchants, many items are now 20-30 percent more expensive, reflecting supply constraints and higher costs. They described uncertainty about whether imports can be secured in the near term and what future pricing might look like, given the continued conflict-related risks and limits on connectivity that complicate ordering, payments, and logistics.

 

A central factor in the slowdown has been the government’s near-total internet shutdown, which has been in place since February 28, 2026. The government has cited security concerns for the restrictions. Business owners and workers said the outage has hit online commerce and remote work especially hard, forcing many to rely on basic state-run intranet platforms that do not provide the same reach or functionality as broader internet access.

 

Telecommunications carriers are reportedly preparing a tiered internet system that would further segment access. While details were not provided, the prospect of differentiated connectivity adds another layer of uncertainty for companies that depend on stable communications to manage sales, customer service, and supply chains. For smaller firms and independent workers, limited access can translate into lost income and reduced ability to compete.

 

The combined impact of infrastructure damage, sanctions, and internet restrictions has contributed to layoffs across multiple sectors. Reports cited job losses at technology firms, automotive manufacturers, and media outlets, highlighting how the downturn is spreading beyond any single industry. With commercial activity still subdued and operating conditions constrained, the economic outlook is expected to worsen in the coming months.