Live updates: Follow the latest news on Iran war
When rumours began spreading this week that Iran's Amazon-style e-commerce company Digikala was to lay off 2,000 staff members, panicked messages spread online.
“It’s the tip of the iceberg of the economic consequences,” one man wrote on X.
Digikala chief executive Massoud Tabatabaei dismissed the rumours. The real number of layoffs was 200, Mr Tabatabaei said on Tuesday, according to Iranian news outlet Khabar Online. The redundancies were due to the “specific conditions” in Iran and “economic uncertainties”, he said.
Still, the 200 layoffs represented three per cent of the company’s workforce. Founded by two brothers in 2006, Digikala had been seen as an Iranian success story, first selling electronics before branching out into clothes, e-books, e-payments and other consumer goods.
The layoffs there are one symbol of the huge economic challenges that Iranians are facing during the war. Mr Tabatabaei acknowledged that leaving people without work would affect their lives.
“We know that behind every number, there are the lives and career futures of colleagues who have played a role in shaping the path of Digikala. This decision has been a difficult and human-orientated matter for us,” Mr Tabatabaei said.
The economic hardship comes as Iranians face the trauma of war, renewed uncertainty over their future, and no clear answer on whether the conflict with the US and Israel will end soon.
US President Donald Trump announced an unlimited extension of his initial two-week ceasefire on Tuesday night. But he said the US would maintain a blockade on Iranian ports, after the two sides failed to meet for anticipated talks in Pakistan's capital Islamabad.
Lay offs and inflation
One million people have lost their jobs and two million more have “indirectly” fallen out of work since the war began, Iran’s Deputy Labour Minister Gholamhossein Mohammadi was quoted as saying in Iranian media. Iran has a population of about 90 million people.
For Iranians, 39 days of US and Israeli air strikes that started on February 28 compounded already dire economic circumstances. They were caused by years of international sanctions and, Iranian businesspeople and analysts say, mismanagement of the economy and resources such as water and energy. The International Monetary Fund expects the country’s economy to shrink by 6.1 per cent this year, and the Iranian government has put the bill for war losses at $270 billion.
One businessman in Tehran told The National his company had been forced to lay off 15 per cent of employees, although some, he said, had already been intending to leave.
“In all the big companies we are hearing about large numbers of redundancies. In Iran, people who lose their jobs can go on the dole, and we’ve heard that the social security offices for that have become really busy, lots of people went to get that,” he said. “For several months there has been very little work, loads of places are shut, and businesses don’t have any turnover.”
Businesses that provide basic essentials, such as medicines and food items, have weathered the war, the businessman said. But as Iranians’ incomes have been ever more squeezed, and the war prompted businesses large and small to keep their doors shut, many have suffered.
“The situation is really dire for clothes shops, and even computer equipment and home supplies retailers,” he said.
Minimum wage increases announced by Iran’s Labour Ministry may help households tackle sky-high inflation, which the IMF puts at nearly 70 per cent for this year. At the same time, business owners, already facing low turnovers, are struggling to pay the higher wages and looking to reduce their workforces.
Business leaders are giving tips and advice on social media for companies as to how to survive.
“Due to the terrible recession of the Iranian economy due to the war and the internet shutdown, the issue of reducing human resources is a very bitter reality,” leading Iranian economist Siamak Ghassemi wrote on X on Tuesday.
Mehdi Bostanchi, board chairman of the Bostanchi Industrial Group, wrote that small and medium-sized businesses needed to respond quickly to people’s current demands, including, “consumable parts, repairs, replacements and essential products at affordable prices”.
Runaway inflation is also squeezing Iranians’ incomes, exacerbating already huge reductions in their spending power. It was a slump in the exchange rate that prompted protests in December last year, which spread into the largest anti-government demonstrations in Iran’s modern history.
Conflict-related shocks could force another 4.1 million Iranians into living on less than $8.30 a day, potentially raising the overall poverty rate to as high as 41 per cent, the UN's development programme reported earlier this month.
While there are no widespread shortages overall, Iranians report persistent price rises that are making the purchase of essentials more and more difficult.
“Compared with mid-February, food prices have rocketed,” one woman in a city in southern Iran told The National. “Everything has gone up by 50 to 70 per cent – meat, dairy products, detergents.”
Chicken breast fillet is now priced at about 480,000 tomans – about $5.60 – a kilo, The National has verified. The new monthly minimum wage in Iran is 166 million rials – about $108.
Even before any direct impact from the US blockade of Iranian ports, the war has caused prices of some raw materials to rise amid scarcity.
Strikes in the war on petrochemical plants, including at Mahshahr in southern Iran, and on steel production sites, have affected plastic and metal supplies, particularly for industries such as packaging.
Plastics are becoming so scarce that shops are introducing unofficial rationing, the woman added.
“Every time you go to a shop, they say, ‘Excuse us, if you can manage not to, please don’t take a plastic bag'.”
The Tehran businessman said the government is attempting to provide support to businesses, by allowing them to defer tax and insurance premium payments, and by offering loans.
“But it’s still not enough,” he said.
Internet down
A widespread internet blackout has also had a huge impact on Iranians’ incomes. The wartime shutdown followed a blackout imposed by authorities during January’s protests, which were put down with brutal force and in which at least 7,000 people were killed, according to human rights groups based outside Iran.
Internet monitor NetBlocks said last week that the wartime shutdown has cost the Iranian economy at least $1.8 billion. Many small business owners in Iran used social media platforms such as Instagram to advertise and sell their products. A 2022 report on Iranians' social media usage by Washington DC- based analyst Holly Dagres said that 11 million Iranians had Instagram-based businesses, and the number has likely grown since then.
But now business has dried up because customers cannot get online.
Sohrab, a resident of Tehran, helps a relative manage her Instagram page selling women’s accessories. But businesses like hers were “completely out of work”, he said because even if they could get online, customers cannot. He spoke using a pseudonym for security reasons.
“She had great hopes for her business,” Sohrab told The National. “She was hit several times, every time the internet was cut off. Now her income is zero.”
Iranian authorities are now introducing a system known as “internet pro”, whereby businesspeople who need access to the internet can get online, according to the Donya-ye Eghtesad news outlet.
Iran’s National Security Council recently approved legislation allowing organisations involved in “production, industry and commerce” to get online with “due regard for security considerations”, the outlet quoted an MP as saying.
But the move does not mean free internet access for the wider population, and the limited access will not help those who rely on online buyers if their potential customers are still blocked.
“As authorities work to develop tiered access for select users and businesses, the human impacts and economic harms of this digital censorship measure continue to spiral,” NetBlocks said on Tuesday.
Hormuz blockade
So far, the US blockade of Iran’s ports around the Strait of Hormuz has not had a huge impact on Iran’s government revenue from oil sales, analysts say.
That is because Iran is still receiving income for oil sales that were agreed before the war and are expected to be delivered within three months, said Iman Nasseri, the Dubai-based managing director of FGE Middle East, an energy consultancy.
A blockade would begin to have an impact in several months, but Iran is operating on the calculation that it will be able to sustain its own parallel blockade of the Strait of Hormuz longer than the US can – or is willing to – continue its blockade.
“The key question is if the world can stand another three months of the Strait of Hormuz being fully closed,” Mr Nasseri told The National. “It’s 20 million barrels per day of oil and products, and a significant amount of gas – 8 to 10 million tons of LNG every month – lots of fertilisers and whatnot. And the answer is no. Iran knows that.”
The impact of Iran’s ability to prevent vessels passing the Strait of Hormuz, “is more prompt and imminent than the impact on the Iranian economy from the US blockade”.
He described Iran as “half bankrupt” but with a system that is “not going anywhere”.
“You put an economic pressure on a country which has been under immense economic pressure and has survived, at the expense of putting a huge amount of economic pressure on the rest of the world economy,” he added.
Iran has about 90 million barrels of available storage capacity, meaning it can continue producing crude at its current level of about 3.5 million barrels per day without exports, and even longer if it chooses to cut production.
As well as the strikes on petrochemical and steel plants, overall insecurity and ships caught in transit in the Strait of Hormuz have also caused shortages and price rises for some raw materials.
“Right now, the main goods that are not coming in are raw materials for factories” the Tehran-based businessmen said. “Before there were stocks of these materials in Iran and now they have become expensive.” He cited examples such as chemicals used to produce various materials that are not produced in Iran, and helium gas, which is used in hospital MRI scans and laboratory analyses.
“If this situation drags on for a few more months, we'll face very serious issues in that sector,” he said.
