Soaring inflation and plummeting economy test Iran's ability to withstand war and US blockade

TEHRAN, Iran (AP) — Iran’s grip on the Strait of Hormuz is throttling the world’s energy supplies and inflicting global economic pain, but the struggles of the Islamic Republic's own economy are testing its ability to withstand the war and defy Washington’s demands.

Iranians have been hit by spiraling prices for food, medicine and other goods. At the same time, the country has seen mass job losses and business closures caused by strike damage to key industries and the government’s monthslong shutdown of the internet.

The economic cost of the war and the U.S. naval blockade “has been very substantial and unprecedented for Iran,” said Hadi Kahalzadeh, an Iranian economist and research fellow at Brandeis University.

But Iran has withstood decades of economic pressure and sanctions and its capacity to adapt has not been dismantled, Kahalzadeh said.

“Iran can probably avoid a complete economic collapse or total shortage of essential goods, but at a very high cost,” he said. “The main cost will be passed to ordinary Iranians through higher inflation, more poverty, weaker services and a much harder daily life.”

The International Monetary Fund has predicted the Iranian economy will shrink by about 6 percentage points in the next year. Iran’s official statistics center reported in mid-April that annual inflation was 53.7%, while inflation for food breached 115% compared with the same period last year.

Meanwhile, Iran’s rial currency has lost over half its value in the past year, falling to a record low of 1.9 million to the dollar at the end of last month. The economic woes helped fuel massive protests that spread across the country in January.

Parked beneath an overpass in central Tehran, 56-year-old Hossein Farmani was idling alongside other taxi drivers waiting for customers. He popped open the trunk of his car to take out a kettle before pouring himself a glass of tea. He reflected on the wild price increases in the past year. Alongside items such as milk, the price of tea has risen over 50% since the war began.

“If things keep heading in this direction, we’re going to suffer a lot more,” Farmani said.

Prices had already climbed steadily over the past two years, but an Associated Press tour of grocery stores in Tehran found large jumps from February, before the war began: Chicken and lamb were up 45%, rice 31% and eggs 60%.

Iranian authorities have announced measures to help Iranians bear the crippling prices. But many of these policies — including a 60% hike in the minimum wage and coupon programs for essential goods — are stoking inflation, Taymur Rahmani, an economist at the University of Tehran, wrote recently in a leading business newspaper, Dunya-ye Eqtesad.

Since the war began, free bus and metro fares in the capital are also not helping the city's struggling taxi drivers.

Another driver waiting nearby, Mohammad Deljoo, 73, said he was supporting his family of two children on a daily income of $4. He said there was no shortage of goods in shops and instead blamed the problem on “price gouging.”

“We only buy what’s absolutely necessary, things like bread and potatoes. Even eggs have become too expensive for us,” Deljoo said. He said the price for tires and other car parts rose fivefold in less than a year.

“One price today, another tomorrow. How is that possible?” he said.

Amid job losses, many Iranians are scrambling to find new ways to make money. Ali Asghar Nahardani, 32, said the ride-hailing app he works for had not paid in him in over a month. He turned to street vending to cover his living expenses.

“We’re just living day by day, trying to get through this situation while the war conditions continue,” he said.

The closure of the strait has hiked energy prices across the world. But in Iran, the war has marked another step in the ruin of a once large and prosperous middle class following decades of sanctions.

By 2019, Iran's middle class had already shrunk to around 55% of the population, explained Mohammad Farzanegan, a professor of Middle Eastern economics at the University of Marburg. New rounds of sanctions as well as wars, corruption and economic mismanagement have further cut that number, he said.

The war will likely push several million Iranians below the poverty line, according to a report published by the U.N.'s development agency in late March.

A physical trainer who lives in downtown Tehran described the economic crisis as a mental health crisis for Iranian society. She said many of her clients could no longer afford her fees and training sessions. The few clients she has left have turned to discussing ways to handle signs of depression.

“The system is just collapsing. The layoffs are in factories, in companies, in startups, in whatever your work is,” she said in a voice note by Telegram. She spoke on condition of anonymity out of security fears.

The trainer said she had severely cut back on groceries.

“The last time I bought meat was about two months ago.” She has also given up paying for therapy sessions that she began after divorcing her spouse a year ago. “I am pursuing a master's in psychology so it’s given me the tools to handle my anxieties,” she said.

A resident of Karaj, near the capital, said his insurance company had seen plummeting sales for car and home policies. Families are being dragged down into poverty, he said, also speaking on condition of anonymity out of fear of reprisal.

The Karaj resident, who joined the mass anti-government protests in January, blamed the yearslong decline on “severe systemic corruption” and the Islamic Republic’s costly support for militant groups in Lebanon, Yemen and Iraq.

“Most people blame the government and its ambitions,” he wrote by WhatsApp message.

Iran’s leaders have been trying to shore up the homefront by showing sympathy while also urging the public to endure the economic pain for the sake of the war effort.

In a series of messages on his official Telegram channel Friday, the new supreme leader, Mojtaba Khamenei, described the current phase of the conflict as an “economic battlefield” and asked employers to “avoid layoffs as much as possible.” Khamenei is believed to have been wounded early in the war by Israeli strikes and has yet to appear in public.

Parliament speaker Mohammad Bagher Qalibaf — who has emerged as a key player in the war effort and U.S. talks — urged Iranians to “be frugal” in their spending. He said on his official Telegram account that government administrators and the public “have a duty to help each other” to ease economic effects.

The U.S. blockade has restricted Iran's critical Gulf trade. Over 90% of Iranian trade, particularly the oil exports that bring in billions of dollars, flows through its southern ports, Farzanegan estimated.

Farmani, the taxi driver, said he did not want to accept what he called a “humiliating” peace with the U.S. and Israel.

“A country that has sacrificed so many martyrs and has so many people willing to give their lives cannot simply let others from across the world dictate terms to us.”

Radjy reported from Cairo. Associated Press writer Nasser Karimi contributed to this report.

Motorbikes drive past a billboard with graphic showing the late Iranian Supreme Leader Ayatollah Ali Khamenei, who was killed in the U.S. and Israel strikes on Feb. 28, with his framed fist amongst his supporters framed fists in downtown Tehran, Iran, Wednesday, May 6, 2026. (AP Photo/Vahid Salemi)

Vehicles drive past banners showing portraits of the school children who were killed during a strike on a school in southern town of Minab on Feb. 28, at Tajrish square in northern Tehran, Iran, Sunday, May 10, 2026. (AP Photo/Vahid Salemi)

People walk along a sidewalk in northern Tehran, Iran, Sunday, May 10, 2026. (AP Photo/Vahid Salemi)

A woman looks at the window display a women's clothing shop in northern Tehran, Iran, Sunday, May 10, 2026. (AP Photo/Vahid Salemi)

A Revolutionary Guard soldier stands at the counter of a fast food restaurant in northern Tehran, Iran, Sunday, May 10, 2026. (AP Photo/Vahid Salemi)

LONDON (AP) — Britain’s Princess Catherine is set to make her first overseas trip since announcing her cancer was in remission, traveling to Italy for a two-day tour focused on early childhood education that will undoubtedly receive widespread media attention.

The princess, commonly known as Kate, will travel to Reggio Emilia in northern Italy to learn about its child-centered approach to early education, which has become a focal point for educators around the world. The trip is part of what her office called an international “fact-finding mission” to explore different approaches to supporting young children and their carers.

The choice of destination for Kate’s first trip abroad since her 2024 cancer diagnosis is no coincidence as early years development is the signature cause of the mother of three who will one day be queen.

“She wants to make a point that she is going to keep making this her cause," said Joe Little, managing editor of Majesty Magazine.

The Reggio Emilia approach is based on the idea that young children have many different ways of thinking, understanding and expressing themselves, and that teachers need to work with their students to help them learn.

The visit will highlight the idea that the environment and human relationships that surround children are crucial to laying the foundations for a resilient and healthy future, Kensington Palace said in a statement.

“The Reggio Emilia approach clearly suits the narrative at the start of international operations,’’ Little said.

The visit is part of her work with the Royal Foundation Centre for Early Childhood, which she founded in 2021 to increase public understanding of the importance of supporting children in the first five years of life.

One of Britain’s most popular royals, the Princess of Wales has proved to be adept at focusing attention on matters she cares about.

When Kate announced that she had completed chemotherapy treatment in a soft-focus, Insta-ready video, she ventured into realms not previously inhabited by the royal family, whose members traditionally shied away from talking about their health.

And she did it in a new way, using social media to share the fact that for all her wealth and privilege, her life had been upended by cancer, like so many others.

Then, later, when she announced she was in remission, she spent the day supporting other cancer patients at the hospital where she received treatment.

In a statement on social media, she offered her thanks to everyone who helped her and her husband, Prince William, as they navigated the ups and downs of treatment and recovery. She hugged patients at the Royal Marsden Hospital in London and described her own treatment as “exceptional.”

“It is a relief to now be in remission and I remain focused on recovery," the princess, now 44, wrote in a note signed with her initial, C. “As anyone who has experienced a cancer diagnosis will know, it takes time to adjust to a new normal."

Her new normal involves becoming the go-to advocate for early years education, which refers to the learning and development of children from birth to five years of age.

There’s lots to do in Britain, where advocates say there aren’t enough spaces to go around and many teachers don’t have the training they need.

Edoardo Masset, associate research director at the National Institute of Economic and Social Research, said Kate’s focus on early childhood development is important because it brings attention to an issue that really matters to children.

“This relationship between early years education and success later in life is supported not only by strong theoretical arguments, but also by a large body of evidence on the effectiveness of programs for preschool children,’’ Masset said in a blog post.

FILE - Britain's Princess Kate is seen at the British Fashion Council at 180 Studios in central London on May 13, 2025. (Aaron Chown, Pool Photo via AP, File)