TEHRAN — March 29, 2026 : Iranian President Masoud Pezeshkian has cautioned senior leadership of the Islamic Revolutionary Guard Corps (IRGC) that Iran’s economy could face total collapse within three to four weeks if a regional ceasefire is not achieved, according to informed sources cited by Iran International.

The warning reflects growing internal divisions between Iran’s civilian administration and military leadership as the ongoing conflict enters its fifth week, intensifying both economic strain and governance disputes.

Internal Tensions Over War Strategy

The reported disagreement centers on the direction and management of military operations. President Pezeshkian is said to have directly criticized IRGC Chief Commander Ahmad Vahidi over continued escalation, including cross-border strikes that have contributed to mounting regional tensions and domestic economic pressure.

The divide became publicly visible on March 7, when Pezeshkian issued a video message apologizing for what he described as “fire at will” attacks by Iranian forces on neighboring countries. He instructed that such operations cease unless directly provoked. However, military activity reportedly resumed shortly after the broadcast.

Sources indicate that Pezeshkian has since demanded that executive and operational control over conflict-related decisions be returned to the civilian government. This request has been rejected by Vahidi, who instead attributed the country’s economic vulnerability to the administration’s failure to implement structural reforms prior to the conflict.

Further complicating the power balance, the IRGC has reportedly expanded its influence within Iran’s security institutions. The Guards are said to have pressured the president into appointing Mohammad Bagher Zolghadr, an IRGC-affiliated figure, as secretary of the Supreme National Security Council—effectively reducing civilian oversight in strategic decision-making.

Economic Indicators Show Widespread Strain

The political dispute is unfolding against a backdrop of severe and accelerating economic distress. Iran’s economy, already weakened by sanctions and structural inefficiencies, is showing signs of systemic disruption under wartime conditions.

Banking infrastructure across major cities has been significantly affected. Many ATMs are either out of cash, inaccessible, or non-functional, while digital banking platforms—including those of major institutions such as Bank Melli—are experiencing repeated outages.

Public sector finances are also under pressure. Reports indicate that government employees have not received regular salaries or benefits for up to three months, affecting a large segment of the workforce.

Inflation, which had already reached between 105% and 115% for basic goods in February, has continued to rise since the onset of the conflict. Shortages of raw materials have disrupted factory operations, further constraining supply and pushing up prices of essential commodities.

Poverty levels have increased sharply. Data cited by economists and state-affiliated institutions suggest that more than 40% of the population now lives below the absolute poverty line, with the figure exceeding 50% in Tehran.

Currency Devaluation and Shift Toward Dollarization

The Iranian rial has undergone a significant loss of value, accelerating a shift toward informal dollarization in domestic markets.

By late 2025, the exchange rate had weakened to approximately 1,430,000 rials per US dollar, compared to around 800,000 earlier in the year. The sharp depreciation has eroded purchasing power and undermined confidence in the national currency.

As a result, key sectors of the economy—including real estate, rental markets, and automotive transactions—are increasingly being conducted in US dollars rather than rials, reflecting a structural shift in pricing practices.

Fiscal Pressures and Budget Adjustments

To manage wartime financial demands, the government’s 2026–2027 budget relies heavily on inflationary financing and increased taxation.

Oil revenue, historically a central component of Iran’s fiscal framework, has declined sharply. Its share in the national budget has fallen to approximately 5%, down from 32% in the previous year. To compensate, authorities have raised taxes by more than 60%, placing additional strain on businesses and households.

The conflict has also disrupted energy infrastructure and oil and gas operations, further limiting revenue streams and affecting supply chains. In several regions, food prices have risen by at least 50% compared to pre-war levels.

Broader Economic Context and Outlook

Iran entered the current conflict period with pre-existing economic vulnerabilities, including high inflation, currency instability, and the ongoing impact of international sanctions. The continuation of hostilities is now compounding these challenges.

According to sources, President Pezeshkian has emphasized that a ceasefire is essential within weeks to prevent further deterioration and maintain basic economic functionality. The warning underscores concerns among policymakers about the limited timeframe available for stabilization under current conditions.

No official confirmation of the reported warning has been issued by Iranian state media or government spokespersons. However, analysts note that prolonged conflict could deepen budget deficits, banking system imbalances, and supply disruptions, reducing the government’s ability to respond effectively.

The situation reflects a convergence of economic stress, institutional friction, and strategic disagreement, with implications for both domestic stability and regional dynamics.