Inflation in Iran sparked protests in January of this year, resulting in 7,000 casualties. This is also one of the reasons behind the U.S. military’s strikes against Iran, and Iran’s economic situation has now fallen into an even deeper crisis. (Image/AI)

According to the Associated Press, Iran’s consumer price index (CPI) surged 77.2% year-on-year in May, the highest rate since World War II, underscoring how the impact of war, international sanctions, and chronic economic imbalances are placing ever-greater strain on the country’s citizens.

A report recently released by the Central Bank of Iran has, for the first time, formally acknowledged that the war and the uncertainty over a possible escalation of hostilities have severely undermined the value of the Iranian rial. For ordinary people, soaring prices have long been evident in everyday life: whether buying food, taking a taxi, or seeking medical care, they must now pay costs far higher than in the past.

In addition to the impact of war, years of poor economic management, government corruption, and international sanctions have continued to weigh heavily on this economy, which is highly dependent on oil exports. As the United States and its allies tighten restrictions on Iran’s oil exports, Tehran’s vital source of fiscal revenue has been severely undermined.

According to central bank data, overall consumer prices in May rose 77.2% year-on-year, an increase of 8.5 percentage points from April. Among them, the prices of everyday expenses such as pharmaceuticals, taxi fares, tobacco, and telecommunications services have seen an annual increase of as much as 113.8%.

The last time Iran experienced more severe inflation was in 1942, during World War II. At the time, British and Soviet forces entered Iran and took control of the railway transportation system, disrupting food supplies. Coupled with poor agricultural yields, this triggered a severe famine, hyperinflation, and outbreaks of infectious diseases, resulting in massive civilian casualties.

The Bamdad Institute for Economic Studies, a Tehran-based think tank, has described the current pace of price increases as “unprecedented since World War II.” However, Iranian officials have been rather low-key about the significance of this historic figure.

The impact of the war on Iran’s economy continues. Since the beginning of this year, airstrikes have severely crippled commercial activity and the oil industry, while international sanctions and export restrictions have made it difficult for crude oil to enter global markets smoothly. Even as some conflicts have begun to subside, many enterprises continue to face operational challenges, and government tax revenues have also been affected.

Currency depreciation has been equally striking. In 2015, one U.S. dollar was equivalent to roughly 32,000 rials; today, the exchange rate has fallen below 1.7 million rials per dollar, reflecting a lack of market confidence in Iran’s economic outlook.

Iranian President Masoud Pezeshkian admitted in May, “Prices will definitely rise.” “We are in the midst of a fight, and therefore must accept this predicament.”

The economic crisis has also prompted concerns that new social unrest may erupt. Over the past several years, rising food and fuel prices have repeatedly sparked nationwide protests. In early 2026, Iran witnessed large-scale anti-government protests, and according to human rights groups, the ensuing crackdown left more than 7,000 people dead or injured.

Tehran-based economist Saeed Laylaz warned that Iran’s annual inflation rate is likely to surge past 80 percent. He pointed out, “Iranian society cannot sustain an annual inflation rate exceeding 25 percent over the long term.” As the cost of living continues to soar, the Iranian government is likely to face even greater social and political pressure in the future.