How did the Iranian Revolution and Iran-Iraq War disrupt Tehran’s economy?

The Iranian Revolution (1978–79) and the subsequent Iran-Iraq War (1980–88) severely disrupted Tehran’s economy, ending several decades of continuous growth.1

The revolution brought radical economic changes, including the nationalization of banks and large private firms, which led to a massive expansion of the public sector; by the 1980s, nearly half of the working population in Tehran was employed by the government. This period was characterized by high inflation, disinvestment, falling oil prices, and a significant loss of capital and skilled labor.1

The Iran-Iraq War further exacerbated these challenges. Tehran suffered from physical deterioration, underinvestment, and economic decline, compounded by Iraqi air raids and terrorist attacks in the mid-1980s. The conflict also stalled critical infrastructure projects, such as the city's underground train network, which faced decades of delays due to the war and a lack of funding. Ultimately, the combined impact of the revolution and the war left the country grappling with crushing economic problems that persisted until the normalization and reform efforts of the 1990s.2345