The country's economic growth in the first quarter of 2026, including oil, was reported at negative 10.1 percent and without oil at negative 4.6 percent. The gross domestic product at constant prices of 2023 in this spring reached 21,795 trillion rials, compared to 24,255 trillion rials in the spring of last year, indicating a significant decrease.
Meaning of Production Decline
This figure means that the actual volume of economic production in this spring was 10.1 percent less than in the spring of last year. The details of the report show that the economic decline is not limited to oil; the value added in the industrial and mining sectors decreased by 14.7 percent and services by 4.8 percent, while agriculture grew by 2.3 percent. Within the industrial and mining sectors, oil and natural gas experienced the most severe decline at 26.4 percent.
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Gross fixed capital formation also decreased by 8.4 percent and exports of goods and services dropped by 35.7 percent. On the other hand, real household consumption also fell by 4 percent, indicating a recession across all sectors.
Impact of War and Sanctions
The war is considered the most significant short-term shock of this period. The war between the United States and Israel against Iran began on February 28, 2026, and nearly the entire quarter covered by the new statistics occurred under conditions of war, disruption in maritime trade, and stricter limitations on oil and gas exports. The oil and gas sector accounts for about 6.7 percentage points of the negative 10.1 percent growth, indicating the significant impact of this sector on the overall production decline.
However, the 4.6 percent decline in the economy without oil also signifies deeper problems rooted in sanctions and economic policies. The World Bank had previously predicted that Iran's economy would shrink by 1.5 percent in the fiscal year 2026/27, citing the main reason for this decline as reduced oil production and trade restrictions.
Oil and financial sanctions from 2011 to 2013 and their return after the U.S. withdrawal from the nuclear agreement in 2018 have increased the costs of trade and investment and put pressure on foreign exchange revenues. Studies show that Iran's real fixed capital formation has decreased by over 50 percent over the past decade.
The energy imbalance cannot be attributed solely to this year's war; even before the war, industries faced serious limitations in energy supply, and the World Bank still considers the persistent shortage of water and energy as one of the main constraints on Iran's non-oil sector. The war has destroyed infrastructure and exacerbated shortages, but it has damaged a network that already lacked sufficient storage and investment capacity.
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