Iran's War-Related Economic Loss Near $150 Billion

Economic Damage to Iran from War and Blockade

An estimate has placed the total explicit economic damage to Iran as a result of the war and blockade at $144 billion, but experts believe the true figure is significantly higher. A report by the Foundation for the Defense of Democracies (FDD), a pro-Israel think tank, provided one of the first detailed assessments of the economic impact on Iran. The FDD’s Center on Economic and Financial Power senior research analyst Daniel Swift and FDD’s CEFP senior director Elaine Dezenski offered a range of $50 billion to $300 billion, with $144 billion being the most likely middle estimate.

However, the model deliberately excluded uncertain or difficult-to-quantify factors, which means it likely underestimates the actual economic damage. The calculation was based on hydrocarbon revenue losses and physical replacement costs. Using satellite imagery, U.S. Central Command battle damage reports, International Atomic Energy Commission assessments, reporting, and Iranian statements, Swift and Dezenski calculated the combined damage to military and strategic assets, economic infrastructure, and disruptions to the economy.

Half of the total costs of direct damage were attributed to nuclear facilities, missile and drone production infrastructure, air bases, naval vessels, and air defense systems. The other part came from analysis of lost revenue from oil and gas industry disruptions and the prevention of oil exports. The majority of the damage came from the war itself, with Swift stating that two-thirds of the economic damage was due to the air campaign, while the remaining one-third was from the blockade.

Replacement costs for Iran, which make up the lion’s share of the cost estimates, vary due to supply chain difficulties and sanctions. For instance, Iran's prized F-14 Tomcats are irreplaceable since only the United States ever produced them. The report noted that most military hardware has a use-life measured in decades, and rebuilding Iran’s nuclear program, missile production infrastructure, and naval fleet would require not only substantial financial resources but also time, technical expertise, and supply chains that U.S. sanctions have already severely constrained.

Swift mentioned that the model excluded unquantifiable factors for accuracy, but these factors contribute to the true costs of the war being much higher. These include the cost of rebuilding its regional proxy network, human capital loss, astronomical wartime inflation, reconstruction financing, and more, which could be valued in the hundreds of billions. Long-term foreign direct investment deterrence was a major unquantifiable cost.

“Who's going to put money in rebuilding Iran if it's still in an uncertain peace?” he said.

The blockade’s biggest impact is on Iran’s oil industry, a central part of its economy. Unable to export current flows and running out of storage space, Iran will soon be forced to cut production, which could cause long-term damage. “If they run out of storage capacity, they have to take less out of the wells, which could allow water seepage and permanent damage to production capacity,” Swift explained, adding that this could happen as soon as this month.

Research fellow and Middle East expert Zineb Riboua at the Center for Peace and Security in the Middle East, Hudson Institute, highlighted the impact of the Trump administration’s Operation Economic Fury on Iran’s economy, closing many of its desperately needed sanctions loopholes. “Usually, whenever there were sanctions, there would be huge loopholes, especially in the shadow banking that passes through the [United Arab Emirates], but also through China,” she said. “But Operation Economic Fury really put pressure on those two major loopholes, and also the Treasury seized some crypto wallets.”

The Islamic Revolutionary Guard Corps used these loopholes to buy more time during negotiations, but now, “the more they think they're going to buy time, the more pressure comes at them.” Riboua added that the economy was not doing well before the operation and is now worse. “They obviously do not show it, because it's not in their mentality to do so, but it's not looking good.”

Another major factor damaging the Iranian economy is the internet blackout, which has lasted over 70 days. While essential for Tehran’s suppression apparatus, it cripples Iranian trade and commerce.

Jon Alterman, Zbigniew Brzezinski chairman of global security and geostrategy at the Center for Strategic and International Studies, stressed the massive impact of the war and blockade on the Iranian economy but expressed skepticism about putting a number on the damage. “The economy is so distorted in Iran, to start with, that the sort of normal economic numbers don't give you as accurate an insight as it sounds like it does,” he told the Washington Examiner.

As an example, he pointed to how gasoline is “basically free,” but the Iranian rial is “the most worthless currency in the world.” “I would say this war has profoundly affected every single corner of the Iranian economy,” Alterman said. “Every corner. There's not a part of the Iranian economy that is not profoundly shaken by this war, but it's also a totalitarian government with control over the media, control over the internet, and the clear willingness to kill dissenters. So how much are people aware? It's operating according to a completely different set of rules.”

As for the main question of the day, how long Iran can hold out, Swift, Alterman, and Riboua were all hesitant to give an exact number. Several outlets reported that a CIA estimate put the time frame at three to four months, a figure the three believed plausible. Alterman voiced caution against any schedule, noting that many revolutions are impossible to predict.

“Revolutions and uprisings aren’t about math," Alterman said. "There's math involved, but there's no arithmetic tipping point." He noted how the 1979 Islamic Revolution seemed to many analysts, including the CIA, to come out of nowhere. “It was just a few random things breaking a certain way,” Alterman said. “And it's not like you reached a tipping point. It's just random stuff happening.”

“I think the regime is under stress. They've lost a lot of experienced people," he added. "Mojtaba Khamenei doesn't have legitimacy and doesn't have a wide base of support. … But whether it's fatal or not depends on partly on the economy and partly on some random things that may or may not happen."

Riboua was the most bullish on the economy collapsing sooner rather than later. “I think that they can't hold out for a very long time, because this is a systemic economic crisis, so every day it will just get worse,” she said, adding that Operation Economic Fury had stripped them of most of their usual coping mechanisms.