Economic impact of the Iran–Israel proxy conflict

The Iran–Israel proxy conflict and the direct hostilities in mid-2025 have strained Iran’s finances, infrastructure, and human capital. Iran has incurred direct costs from military expenditures and war damage, indirect costs from decades of sanctions, and shadow costs such as currency devaluation, high inflation, lost oil revenue, and the erosion of its scientific and military workforce. These pressures have exacerbated pre-existing economic weaknesses in Iran and also had regional spillover effects on energy markets and neighboring economies. During the 2025 war, Israel suffered casualties with thousands injured and displaced and 29 killed. The economic burden of the Israel for the war is estimated at US$6 billion.

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