The fourth center: Iran's wartime economic rise

Weeks into the outbreak of the full-scale terrorist war by the US and Israel on Iran, alarmist doomsayers had predicted a rapid collapse of the Iranian economy.

Yet visiting Tehran's supermarkets and bazaars today tells a different story. Stalls are stocked with fresh produce, household goods remain available, and there are no long queues at petrol stations.

The reality is that Iran has been preparing for this scenario for decades. Its "resistance economy", a doctrine of self-sufficiency first articulated following the 1979 Islamic Revolution, has evolved into a sophisticated thrival mechanism.

While the terrorist strikes have undoubtedly inflicted deep wounds on petrochemical and steel complexes in Asaluyeh and Isfahan, the fundamental architecture of the Iranian economy has proven more durable than Washington or Tel Aviv anticipated.

The Strait of Hormuz has emerged as the decisive theatre of this economic war. Forced into a corner by decades of illegal sanctions and now direct military aggression, Tehran has finally turned its geographical chokehold against its tormentors.

While overall transit through the strait has dropped sharply, data from Kpler, the commodities analytics firm, show that Iranian crude exports actually increased to 1.85 million barrels per day in late March, up approximately 100,000 b/d from pre-war levels.

With Brent crude trading above $100 per barrel for most of March, each barrel Iran manages to export generates roughly double the revenue it would have earned six months ago.

One senior Iranian energy trader told local media that elevated prices are “partially offsetting the military budget and compensating for lost volumes”.

The illegal US naval blockade announced on April 13 has since tightened the noose. But even here, Iranian officials have prepared workarounds.

According to Esfandyar Batmanghelidj, head of the London-based Bourse & Bazaar Foundation, Iran’s oil is not its only revenue stream. The country still generates approximately $2 billion monthly from metals, petrochemicals and agricultural exports even under blockade conditions.

What Western commentators consistently underestimate is the extent to which decades of sanctions forced Iran to restructure its trade architecture.

According to data compiled by Harvard University’s Atlas of Economic Complexity, petroleum’s share of Iranian exports has fallen from nearly 80 percent in the early 2000s to just over 40 percent in recent years.

The country’s non-oil export basket exceeded $120 billion between 2019 and 2024, roughly equivalent to the total annual GDP of a mid-tier European economy.

China has stepped into the vacuum left by Western withdrawal. According to International Energy Agency data, Beijing purchased 90 percent of Iran’s oil exports in 2024, with payments settled in renminbi through banking channels that bypass US sanctions.

More significantly, the two nations have developed a sophisticated barter system in which Iranian crude flows eastward, and in return, Chinese-financed infrastructure projects take shape across Iran.

The revolution that overthrew the US-backed monarchy in 1979 brought with it the promise of "independence" from foreign powers. Under the pressures of war, that promise has become operational necessity. Iran now produces approximately 80 percent of its food domestically, up from less than 50 percent in the 1980s.

The pharmaceutical industry manufactures 97 percent of medicines consumed domestically, including advanced biologics and cancer treatments — no surprise it has become a target in the recent terrorist attacks.

The Tofigh Daru facility, one of Iran's largest producers of anticancer drugs and hospital medicines, was struck by direct missiles, destroying its production lines and research departments.

The Pasteur Institute of Iran, a 105-year-old biomedical research center and vaccine production hub responsible for hepatitis B, BCG and rabies vaccines, was reduced to rubble.

The Delaram Sina Psychiatric Hospital in Tehran was severely damaged while approximately thirty patients were inside.

In total, the Iranian Red Crescent has reported that 307 health, medical and emergency care facilities have been damaged since the aggression began.

The miracle of Iran under bombs that stunned the world

For most nations, the onset of a major war is synonymous with a collapse of basic services. For Iran, the 40 days of US-Israeli war of aggression revealed a nation where economic restoration consistently outpaced damage.

The automotive sector produces sufficient basic vehicles to meet local demand. Even in white goods such as refrigerators, washing machines, air conditioners, Iranian brands such as Snowa and Entekhab have captured most of the domestic market.

This explains why the economy will survive even if the war continues for a year or more. Iran has been living under terrorist sanctions for 47 years. The current terrorist war is not a new condition but an intensification of an old one.

One of the war's most consequential battlegrounds has been electricity. US-Israeli strikes have damaged substations and transmission infrastructure across several provinces.

But here, too, Iran has been able to take the threat in its stride. Having learned the vulnerabilities of centralized infrastructure during the Iraqi war of the 1980s, the Islamic Republic dispersed its power generation capacity across hundreds of small facilities nationwide.

The result is that no province has suffered any major outage and the grid continues to function allowing factories, hospitals and refineries to maintain operations.

No serious observer denies the human cost of this terrorist war or the depth of Iran's current economic distress. The rial has collapsed. Food inflation has exceeded 140 percent for staples.

The suspension of petrochemical exports which generated approximately $13 billion annually before the war will deprive the treasury of hard currency precisely when it is most needed.

Steel production at the giant Mobarakeh complex in Isfahan, which generated $860 million in export revenue in the ten months before the war, has been significantly curtailed. The aviation sector has reportedly lost one-third of its active commercial fleet.

Add to this the human costs such as unemployment, lost wages, interrupted education beside an informal sector estimated at 30 percent of total economic output.

And yet, the history of economic transformation is written in such contradictions. Powerful countries are not built in comfortable times. They are forged in pressure, hardened in crisis, and revealed when the world least expects it.

Writing in the New York Times, Robert Pape, professor of political science at the University of Chicago, has pondered that Iran is emerging from this war as a "fourth center of global power", alongside the United States, China and Russia.

The war that was meant to weaken and isolate it has instead demonstrated that no major economy can afford to ignore its leverage over the Strait of Hormuz.

Pape documents how Asian states are “distancing themselves from the United States” in response to Iranian leverage. For China, India, and much of East Asia, access to energy now passes through Tehran’s permission.

The Iran that emerges from this crucible will not resemble the Iran of 2025. The country is not months away from recovery, but it is months away from recognition.

The corner has been turned, the horizon is clearing and the country about to emerge will demand to be reckoned with, not as a problem to be managed but as a power to be accommodated, Inshallah.

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