US-Israel War Halts Oil and Gas Sector, Crushing Iran's GDP by 10 Percent

Amid the ongoing US-Israel war on Iran, the nation has experienced a severe economic contraction, heavily driven by devastating losses in the crucial oil and gas sector as Washington intensifies its military and financial pressure on Tehran.

Official figures published by the Statistical Center of Iran revealed that the gross domestic product (GDP) plummeted by 10.1 percent year-on-year during the first quarter of the Persian calendar, spanning from March 21 to June 20. This timeframe encompasses the initial months of the conflict, which broke out on February 28. The downturn coincides with soaring inflation, a weakening rial, widespread trade and industrial disruptions, and severe hurdles in exporting oil, a primary source of foreign currency.

What does the economic data say?

While the overall GDP drop is steep, the energy industry suffered an even more catastrophic decline. Crude oil and natural gas activity plummeted by 26.4 percent compared to the same timeframe in the previous year. When excluding oil, GDP fell by a milder 4.6 percent. The economic fallout has rippled across other sectors as well: industry and mining contracted by 14.7 percent, services dropped by 4.8 percent, and manufacturing fell by 2.5 percent. Agriculture stood as the sole exception, posting a growth of 2.3 percent.

These figures arrive against the backdrop of an already strained domestic economy. Earlier in the month, Iran's 12-month average inflation surged to 69.9 percent, while food, beverage, and tobacco costs climbed at nearly twice that velocity. Official unemployment ticked up to 9.1 percent during the spring. Concurrently, the value of the rial weakened from roughly one million to the US dollar a year ago to over 2.2 million by early September.

What is the latest with Iran’s oil exports?

Washington's naval blockade has severely restricted Iran's capacity to sell crude oil throughout the duration of the war. Data from Kpler and Vortexa indicate that Iranian crude and condensate loadings dropped from about two million barrels per day in March down to roughly 740,000 bpd in July, and further collapsed to between 220,000 and 255,000 bpd in August. According to TankerTrackers.com, 29 tankers carrying 36.11 million barrels of crude remain trapped in the Strait of Hormuz. Vortexa also reported that total Iranian crude afloat decreased from 135 million barrels at the end of July to 107 million barrels by late August.

Is Trump winning the economic war on Iran?

Various economic indicators demonstrate that the pressure campaign spearheaded by Washington is taking a heavy toll on Tehran. President Masoud Pezeshkian noted on September 6 that total trade had dropped by 25 to 35 percent, with imports sustaining heavier losses than exports due to the US blockade of the Strait of Hormuz complicating maritime shipping.

Tehran has directly tied the cessation of hostilities to economic relief. Iran’s security chief Mohsen Rezaei stated to Al Jazeera that the nation's conditions for peace involve "the release of our frozen funds and an end to the naval blockade." In parallel, US Treasury Secretary Scott Bessent announced a sweeping financial pressure campaign targeting Iran's global economic interests and revenue sources, including oil, to deter international trade with Tehran.

Military exchanges and attacks have also strained trade with key partners like the United Arab Emirates. The UAE recently instituted an indefinite trade embargo against Iran following allegations that Iranian forces launched ballistic missile attacks—claims that Tehran dismissed as a "false flag operation" orchestrated by the US and Israel.

Chris Beauchamp, a market analyst at IG Group, remarked to Al Jazeera that wars are fundamentally tests of stamina. While the 10 percent GDP slump highlights Washington's successful pressure tactics, the ultimate question remains whether Iran can endure the economic slowdown longer than the US can withstand elevated energy costs. He added that for a regime determined to stay in power, the economic news changes little as long as security forces remain loyal.

What is the latest with diplomatic efforts to end the war?

Despite taking a resolute stance against US and Israeli pressure, Iran has consistently signaled its willingness to explore diplomatic avenues to conclude the seven-month conflict. Rezaei informed Al Jazeera that Tehran has communicated a formal set of conditions to Washington via Qatari intermediaries.

Meanwhile, Iranian state media outlet IRNA reported that Pakistani Interior Minister Mohsin Naqvi is scheduled to visit Tehran, and Iranian Foreign Minister Abbas Araghchi will make a brief stop in Qatar prior to heading to the UN General Assembly in New York. Mediators from Qatar and Pakistan continue efforts to revive negotiations following the expiration of their memorandum of understanding last month.

Iran maintains that it remains prepared for potential future strikes by Washington, with Rezaei noting that such military actions are "very much on the cards." Mark Pfeifle, a Republican strategist and former White House and national security official, suggested that both nations remain open to a diplomatic breakthrough despite the strident rhetoric, pointing out that Iran's omission of demands for reparations and reconstruction money signals potential room for upcoming negotiations.