World Bank estimates a 2.7 per cent contraction in Iran's economy and flags water and energy shortages

13 October 2026

The World Bank's country page for the Islamic Republic of Iran says GDP is estimated to have contracted by 2.7 per cent in 2025/26, the Iranian year ending March 20, 2026.
The Bank attributes the contraction to military escalation in June 2025, widespread protests and strikes, a country-wide internet and telecommunications blackout, and trade disruptions in March 2026 amid growing tensions in the Strait of Hormuz.
It says oil sector performance is expected to be constrained by disruptions to shipping through the Strait of Hormuz, at least in the near term, while non-oil growth is projected to be limited by damaged infrastructure, persistent water and energy shortages, and weakened investment sentiment.
The Bank says high inflation and declining real incomes are projected to suppress domestic demand, and that poverty is expected to increase, driven by high food inflation and import shortages.
It adds that international trade is likely to remain constrained by financial sanctions and by challenges in securing international transport and insurance services.
The World Bank has produced the Iran Economic Monitor, its economic report on the country, since April 2016.