War weighed on US midterms, but Iran's economy is paying heavier price

Iran's economic crisis is deepening as a US naval blockade, wartime damage and disrupted trade routes hit industry, while the threat of renewed war with Washington piles pressure on an already severe downturn.

The war has weighed heavily on Tuesday’s US midterm elections, with the Democrats taking control of Congress, but the cost for Iran is mounting too, with official figures showing gross domestic product down more than 10 per cent year-on-year in the latest quarter.

Iran's Parliament Speaker and chief negotiator, Mohammad Bagher Ghalibaf, seized on the Democrats' gains, saying Americans had voted against the war and warning on X that any attempt by the Trump administration to ignore public opposition would bring a "nightmare". A poster on the Telegram channel of supreme leader Ali Khamenei's media outlet declared "The end of the aggressor's domination" and depicted a defeated Uncle Sam.

But while Tehran projects defiance, the economic consequences of the conflict are becoming increasingly tangible. Iranian cargo is piling up in Pakistani ports.

“At first, they cited 3,000 containers, then 8,000, and eventually stated that 18,000 containers remain stranded there,” Mohammad-Ali Kargascha, a board member of Iran’s International Transport Companies Association, told Mehr news agency.

Show caption: There are signs of growing domestic discontent, with one mon…

The backlog shows how the conflict is disrupting the movement of goods, adding costs for businesses already struggling with sanctions, inflation and declining domestic demand.

Storage charges and other expenses for some shipments in Pakistan have exceeded $25,000, approaching the value of the goods themselves.

Iranian businesses are also struggling to secure alternative transport capacity through Turkey. Some shipments have been rerouted overland, but extra costs and delays are creating further obstacles for importers and exporters.

Impact on industry

Iran's economic contraction is already substantial, according to figures from the government's Statistical Centre of Iran. GDP fell by 10.1 per cent year-on-year in the three months to June 20. Even excluding oil, the economy shrank by 4.6 per cent. Industry and mining contracted by 14.7 per cent, while oil and gas output fell by 26.4 per cent.

Energy shortages pose a longer-term threat to industrial production. Attacks on four Iranian gas-processing facilities in March knocked around 230 million cubic metres of daily production capacity offline. Officials say about 100 million cubic metres a day has since been restored, leaving 130 million unavailable.

The warning extends beyond the damage caused by the war.

Hedayatollah Khademi, a former member of parliament’s Energy Commission, told ILNA news agency on Wednesday that Iran still faced a gas shortfall of around 400 million cubic metres a day, criticising years of neglect of shared gas fields. “It is painful that we are the world's second-largest holder of gas reserves, yet in winter we have to hope that the weather does not turn cold,” he said.

The National Iranian Gas Company has warned that 11 of Iran’s 31 provinces could face supply difficulties during the winter, with industrial consumers potentially needed to use alternative fuels.

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The cement industry is already feeling the effects.

Ali-Akbar Alvandian, secretary of the Cement Industry Employers' Association, said gas supplies to cement factories had been cut from late October, forcing producers to rely on mazut, a heavily polluting fuel oil. Before then, the industry received only five to six million cubic metres of gas daily against demand of about 28 million.

Mr Alvandian said the cost of transporting mazut effectively doubles the industry’s fuel expenses.

Mining companies have reported shortages of explosives, fuel and imported machinery components, adding to production costs and threatening delays across the sector.

There are, nevertheless, signs that Iran is finding ways to keep some trade moving. The Trade Promotion Organisation reported that exports to Turkey rose by 59 per cent and those to Oman by 23 per cent in the first six months of the Iranian calendar year, compared with the same period last year.

Officials said some restrictions on land routes had been eased to compensate for difficulties affecting southern maritime trade. The increases, however, do not signal a recovery in Iran's overall foreign trade.

Growing grievances

The economic strain comes as Tehran faces the possibility of renewed military confrontation. Foreign Ministry spokesman Esmaeil Baghaei said Iran was approaching possible negotiations with Washington with “maximum caution and complete pessimism”, citing the “experience of America violating previous agreements”.

Qatar is relaying messages between Washington and Tehran to revive negotiations, but attacks in and around the Strait of Hormuz and reports of new US strike plans underline the fragility of the situation.

The Islamic Revolutionary Guard Corps said on Wednesday that two more tankers had been destroyed by naval mines near the Strait of Hormuz and that it had shot down another US MQ-9 drone. The claims have not been independently verified. Washington has confirmed limited strikes on Iranian military installations on Qeshm Island.

Show caption: President Donald Trump said there is no immediate plan to st…

The New York Times has reported that US Central Command developed options for renewed strikes against Iran, including a short, intensive campaign. US President Donald Trump told The Financial Times there was no immediate plan to attack, but said American forces were “locked and loaded” if necessary. Some members of his administration have argued that economic pressure and the blockade should be given more time to work.

Signs of growing domestic discontent are also evident. Mark Pyruz, who monitors protests in Iran, recorded 30 demonstrations across 19 locations in the last week of October.

The protests were largely driven by economic grievances, including unpaid benefits, pensions and wages and fuel shortages. Mr Pyruz said they remained relatively small and predominantly economic, but discontent continued across the country.