World Bank warns Iran that war with Israel will crash its economy

By Vered Weiss, World Israel News

The World Bank’s report demonstrated that even a brief war with Israel could bring financial ruin to Iran since its economy is already extremely weak.

The World Bank, in a rare comment on a geopolitical situation, issued a report warning Iran that getting into a full-scale war with Israel may crash its already fragile economy.

The country’s new president, Masoud Pezeshkian, was elected on a social and economic reform platform. Still, all of this could unravel, warned the World Bank, if the country gets involved in Israel’s war with Gaza.

War would be catastrophic for Iran’s economy, the World Bank cautioned and will have far-reaching effects on youth employment, investments, and the struggling automotive industry.

Iran’s economy prior to the war would already be in a bad place since real income per capita in 2024 was lower than it was in 2014.

The World Bank’s report demonstrated that even a brief war with Israel could bring financial ruin to Iran since its economy is already extremely weak at the outset.

The report said, “Iranian entanglement in the Gaza war could result in a loss of GDP and income exceeding 10%, disrupt ongoing economic activities, significantly lower living standards, and further diminish productive investments.”

World Bank economists, including some Iranians, stated that “active involvement in the Gaza conflict will inflict long-term damage on Iran’s human and physical capital.”

They added that “The inevitable devaluation of the Iranian currency would reignite inflation,” with the annual rate quickly rising to around 60%.

Additionally, sanctions that would be imposed on Iran if it starts a war with Israel would lead to a two-thirds reduction in oil exports and a deepening budget deficit.

“The Iranian government,” the economists conclude, “would be forced to divert a significant portion of its budget to defense and military needs, at the expense of critical social and economic goals.”