Iran experiences worst hyperinflation since World War II

Tehran, Iran – At the bustling Bastan market in western Tehran, where the scents of fresh bread and fruit once mingled with colorful fabric stalls, the scene has lost its usual vibrancy. Shoppers wander slowly between counters, handle items, and put them back.

“Every trip to the market now feels like a reconnaissance mission to scout new prices,” said Mashhadi Firouz, 63, a retired worker, standing in front of shelves at a large grocery store while flipping through items to find price tags. “A year ago, a kilo of rice cost about 1.8 million rials ($1.31). Today it has exceeded 5 million rials ($3.63). A bottle of cooking oil cost 700,000 rials ($0.51) last spring; now it’s over 3 million rials ($2.18). My pension doesn’t even cover a third of my family’s expenses.”

He added, “We are witnessing a terrifying expansion of poverty. Not just extreme poverty, but what could be called the poverty of retirees and employees. People with fixed incomes are living below the poverty line for the first time in decades. We are not just complaining about high prices, but about the speed of price increases that leaves us no time to react.”

‘Counting every egg’

A few meters away, Fatima, 46, a homemaker and mother of three, said she now goes to the market three times a week instead of once. “Not because I need something, but to see if any seller is cheaper, or if any item hasn’t been swept up by inflation. Red meat has become a dream, chicken is a guest of honor on the table, and I’ve even started counting every single egg.”

Fatima said hearing that prices double within days or weeks is no longer surprising. But inflation is no longer “an earthquake hitting everyone equally”; it is a selective disease targeting the vulnerable. When food prices rise, a poor family can lose half its income to essentials, while wealthier families are barely affected.

At the wholesale market in the Narenj district south of Tehran, Mehran, 71, a grocery seller, described another side of the crisis: “Inflation doesn’t just hit buyers, it hits us too. Purchasing power has collapsed. People only buy essentials. Prices have doubled in less than four months. I had to reduce my stock, but no one buys. In 40 years of business, I’ve never seen such a downturn, not even during the worst sanctions.” Mehran no longer hopes for profit. “I’m just trying not to go bankrupt and close the shop my father left me.”

Runaway inflation

A new report from the Central Bank of Iran shows the annual inflation rate soared to 77.2% year-on-year in the period April 21–May 20, with a month-on-month increase of 8.5%. Point-to-point inflation for goods reached 113%. This is Iran’s highest inflation rate since 1942, during World War II, when food supply chains collapsed and prices surged.

Arman Khaleghi, head of the Iran Chamber of Commerce, Industries, Mines and Agriculture, described this as a “perfect economic storm” with five factors hitting the economy simultaneously: the elimination of the preferential foreign exchange rate (a subsidized rate for basic goods) causing food prices to skyrocket; early-year protests disrupting market systems; the “Ramadan War” (US–Israel) fueling inflation; annual wage and energy price increases at the start of Iran’s new year; and a naval blockade hampering import-export chains.

Khaleghi stressed: “With war, people rush to hoard basic goods. Demand spikes even without real shortages. The hoarding frenzy alone is enough to push prices up.” This causes a production shock. Damage to key industries, led by petrochemicals, raises packaging costs for food, pharmaceuticals, and detergents. “Even news of a ship being attacked immediately pushes prices up,” he added.

Khaleghi pointed out a paradox: the decision to raise wages and salaries at the start of the year to offset the impact of eliminating the preferential rate proved “completely powerless.” The result is a sharp decline in real purchasing power, beginning to erode household savings, then encroaching on health and education budgets, and finally affecting daily meals. “The state also suffers. Tax revenue, expected to partly compensate for the cost of exchange rate reform, is also shrinking.”

‘Standing at the edge of an iceberg’

At Tajrish Square in northern Tehran, the market appears bustling, but shopkeepers tell a starkly different story. “You think the market is lively, but it’s clinically dead,” said Reza, 47, a shop owner. “People come because the market is the last free entertainment. They wander aimlessly, remembering when they used to go to malls and leave with trunks full of shopping. Now they might not buy anything, and I don’t blame them. As a merchant, I can’t even afford what I sell.”

Reyhaneh, 32, an accountant, said: “Every day I pass by and try to buy something. But I feel sad seeing hundreds of people floating around empty-handed.” Her husband, Mahmoud, 37, a lecturer at a private university, joined in: “You might hear about inflation over 300% for some goods and think it’s a shock from the war. The truth is these numbers are impossible without structural diseases accumulated over decades of dependence on oil revenues. The country used petrodollars to bandage wounds. Now the anesthesia has worn off, and all the illnesses are emerging at once.”

Mahmoud warned: “What worries me is not just rising prices, but the consequences of wrong economic policies that haven’t surfaced yet because they’ve been hidden behind the noise of war. We are standing at the edge of an iceberg; what we see is just the tip. Worse, we are stuck in a state of neither war nor peace, and that limbo is the worst poison that can hit a crippled economy.”