Iran’s non-oil economy contracted 4.6 per cent, while oil and gas extraction fell 26.4 per cent in the quarter covering much of the war period
Iran’s economy shrank 10.1 per cent year-on-year in the quarter to late June, as the war with the United States and Israel hit oil production, industry and economic activity, official data showed.
The contraction was recorded in the first quarter of the Persian calendar, which ran from March 21 to June 20, according to the Statistical Center of Iran. The period largely overlapped with the conflict that began with US and Israeli strikes on Iran on February 28.
The data showed that Iran’s GDP fell 10.1 per cent when oil was included. Excluding oil, the economy contracted 4.6 per cent from a year earlier.
The sharpest fall came in oil and gas extraction. Activity in the crude oil and natural gas sector dropped 26.4 per cent year-on-year during the quarter, according to the official figures. The industries and mining group also contracted 14.7 per cent.
Services, another major part of the Iranian economy, fell 4.8 per cent during the period. Agriculture was the exception among the main sectors, growing 2.3 per cent year-on-year.
The Statistical Center of Iran reported the economic figures but did not explicitly attribute the contraction to the war. The decline, however, came during the first months of a conflict that disrupted Iran’s energy sector, trade and transport.
More from BusinessThe war also affected the wider regional energy market. Iran moved to restrict traffic through the Strait of Hormuz after the strikes, affecting one of the world’s most important energy shipping routes. The disruption contributed to higher oil prices and reduced shipping activity through the waterway.
The economic shock came on top of problems Iran was already facing. US sanctions have constrained the country’s access to international trade and finance, while a weakening rial and high inflation have put further pressure on households and businesses. Reuters reported earlier this month that Iran was dealing with currency shortages, weaker imports and rising prices as the economic squeeze intensified.
Oil remains particularly important for Iran because energy exports are a major source of foreign currency. The latest figures suggest that the damage to the oil sector had a much larger effect on headline GDP than the contraction in non-oil activity.
Iran’s crude exports have also come under growing pressure during the conflict. Reuters reported that Iranian crude loadings fell sharply from around 2 million barrels per day in March to roughly 220,000 to 255,000 barrels per day in August after a US naval blockade disrupted shipments through the Strait of Hormuz.
The latest GDP figures cover only the first quarter of the Persian year. Their significance for the full-year economy will depend on how production, oil exports, trade and domestic demand perform in the following quarters, particularly as disruptions around the Strait of Hormuz continue.
