Inflation in Iran reaches its highest level since World War II. Is another crisis brewing?

Iran’s annual inflation surges to highest level since 2007 Second World War May, highlighted the deepening economic crisis facing ordinary citizens as the country grapples with the impact of conflict, sanctions and long-term structural problems.Data released by the Central Bank of Iran showed that the consumer price index in May rose by 77.2% year-on-year, and monthly inflation increased by 8.5% from April. Prices of daily necessities such as medicines, taxi fares, tobacco and communication services increased by 113.8% year-on-year.The figures mark the first formal acknowledgment that Iranians are already feeling severe inflationary pressures, with many seeing the cost of basic goods and services soar amid a sharp devaluation of the country’s currency.Iran’s private think tank Bamda Economic Institute described the inflation rate as “unprecedented since World War II.”War, Sanctions and Economic PressureEconomists say the price surge reflects the combined effects of devastation from the war, U.S. sanctions and years of economic mismanagement, the Associated Press reported.Iran’s oil industry and businesses have suffered severe damage after recent military strikes, and U.S. measures targeting Iran’s oil exports have further reduced a major source of revenue for the government.Tax revenues are also under pressure as businesses struggle to recover from months of economic uncertainty.The Iranian rial has depreciated sharply over the past decade, from about 32,000 rials to the dollar in 2015 to more than 1.7 million rials to the dollar today.Iranian President Masoud Pezeshkian earlier warned citizens that prices could rise further. “We will definitely offer higher prices,” Pezeshkian said in May. “We are fighting and we have to accept this difficulty,” he added.Is another crisis brewing?The deteriorating economic situation has reignited fears of new anti-government protests. Economic discontent has sparked massive demonstrations in Iran in recent years.Rising food prices sparked protests in 2017 and 2018, while increases in subsidized fuel prices also led to widespread unrest, with hundreds of deaths reportedly reported.Earlier this year, protests against the devaluation of the rial currency became the most violent demonstrations in Iran since the 1979 revolution and the tumultuous years that followed.Analyst Mohsen Jaliwand warned that social tensions could intensify further if economic conditions continue to deteriorate. “I have no doubt that if Trump leaves (without a formal peace deal with Iran)… we will probably see a situation similar to January in late summer because of the economic and social situation,” he said in comments published by Iranian news site Fararu.At the same time, some economists say inflation could still rise further. Tehran economist Saeed Leilaz told The Associated Press that annual inflation could reach 80% in the coming months. He added that “Iranian society cannot tolerate annual inflation exceeding 25%.”