Large Inventories Lend Iran's Industry Wartime Resilience
At the outset of the war, Iranian firms maintained nearly 100 days of inventory.
By Esfandyar Batmanghelidj
For eight years, Iran has been subjected to the most comprehensive sanctions program ever devised, targeting nearly every sector of the Iranian economy. For forty days, Iran was targeted with one of the largest air campaigns in history, with nearly 100 airstrikes per day targeting military sites, government buildings, industrial facilities, and civilian infrastructure. While Iran’s economy has been significantly impacted by the war, the combination of sanctions, airstrikes, and most recently, a naval blockade has not led to an outright economic collapse.
Iran’s economic resilience has flummoxed U.S. officials and boosters of Trump’s “maximum pressure” sanctions. For eight years, U.S. policymakers promised that sanctions would “crush” the Iranian economy. Economic pressure was intended to achieve one of two outcomes. Either the Islamic Republic would make broad concessions to the United States, or it would be toppled in a revolution fueled largely by economic grievances. Instead, the U.S. found itself launching the kind of war that sanctions were meant to avoid. So far, the Iranian economy has demonstrated enough resilience to enable Iranian leaders to draw their much more powerful adversaries into an attritional conflict.
Despite waging economic war on Iran for the better part of two decades, American policymakers have a poor understanding of the Iranian economy. Numerous datapoints would have enabled the Trump administration to anticipate Iran’s ability to sustain most industrial output during wartime conditions.
Inventory Data
Perhaps the clearest indication of this underlying resilience can be seen in data for “days of inventory outstanding,” a standard measure of inventory levels of raw materials, work-in-progress goods, and finished products. This data can be found in the quarterly filings of the more than 700 companies listed on the Tehran Stock Exchange.
Looking at the most recent reports, which were filed in December 2025 in accordance with the third quarter of the Iranian calendar year that ended in March 2026, it becomes clear that Iranian firms held high levels of inventory at the outbreak of the war.
Inventory levels ranged between two weeks and six months depending on the subsector. On average, looking across 30 industrial subsectors, Iranian companies maintained 96 days of inventory. This is about 30 days more inventory than reported by European manufacturers, which have notably increased stock levels in recent years in response to geopolitical shocks. Iranian inventory levels exceed those maintained by American firms by about 40 days.
The variation in Iranian inventory levels is explained by the type of final product, import dependence, and sanctions vulnerability. Companies in subsectors that are largely exempt from sanctions, such as food and beverage manufacturing, or sectors that have limited dependence on imported intermediate goods, such as the petrochemical sector, typically maintain lower inventory levels.
Companies that are highly dependent on imported parts and equipment and are significantly targeted by sanctions, such as those in the industrial equipment or electrical machinery subsectors, maintain the largest inventories. Crucially, these are the sectors most closely connected to Iran’s defense production. Just as Iran reportedly maintains around 40 percent of its drone arsenal and 60 percent of its ballistic missile launchers after forty days of conflict, it also likely maintains extensive inventories of the materials and parts necessary to sustain production of those weapons systems.
Somewhat counterintuitively, Iranian firms have significant financial incentives to maintain large inventories, especially of imported materials and parts. In light of Iran’s persistent currency devaluation, companies use their inventories as a kind of inflation hedge. Rather than hold cash, companies seek foreign currency allocations from the Central Bank of Iran and import materials, parts, and machinery that are likely to appreciate in value in local currency terms. In this way, inventories provide a boost not only to supply chain resilience, but also to corporate balance sheets.
Importantly, the stock levels reported in company filings do not reflect availabilities of all materials or products, just an average. Across industrial subsectors, Iranian firms are beginning to run down inventories. Concerning shortages of certain goods have materialized following the disruptions of the war. But the practice of maintaining large inventories means that such pressures are mounting more gradually and slowly than many U.S. policymakers expected.
Bottom-Up Resilience
The upshot of this analysis is that Iran’s economy is more resilient to sanctions, pressure or blockades than is widely recognized. Should Iran experience a near total interruption in trade, inventories could be stretched in the face of depressed demand or managed through wartime rationalization. Of course, such interruptions remain unlikely, even if the U.S. blockade is strictly enforced. Around half of Iran’s non-oil trade is conducted via overland corridors and through Caspian Sea ports. The combination of large inventories, demand rationalization, and alternative supply chains suggests that Iran’s wartime economy could sustain most industrial production for at least three months, and possibly for as many as six, before significant contractions in output are felt.
Notably, unlike Russian policymakers, who mobilized state resources at the outset of the invasion of Ukraine to boost defense production and shore up domestic manufacturing, Iranian policymakers have largely left firms to their own devices, both during the eight years of sanctions and the recent forty days of war.
In this respect, Iran’s wartime endurance is less a reflection of the power of the Islamic Republic, and more an indication of the underlying structural resilience of the Iranian economy and the firms and households from which it is composed. Among industrial firms, resilience has been achieved through indigenization or diversification of supply chains, the maintenance of large inventories, and the prioritization of technological simplicity and efficiency. American policymakers did not account for these adaptations because they have not waged war against an industrialized country in over 80 years.
Shaped by years of sanctions disruptions, the Iranian approach to industrial management is characterized by a readiness for worst case scenarios, including military conflict. Ironically, Trump’s decision to impose maximum pressure sanctions, while contributing to a slowdown of economic growth in Iran, may have spurred the development of an industrial base more resistant to supply-chain shocks, such as the disruption to maritime traffic in the Strait of Hormuz. Arguably, Iranian leaders were only able to weaponize the closure of the strait because of bottom-up adaptations, such as high inventory levels, that made Iran’s economy less vulnerable to the inherent disruptions to maritime trade.
Of course, the greatest threat to Iran’s economy is not disruptions to trade flows, but rather direct targeting of industrial infrastructure and utilities by the U.S. and Israel. Attacks on major steel and petrochemical facilities have hit production in those sectors, putting millions of jobs at risk.
Trump’s threat to bomb Iran’s major power plants, issued just before the ceasefire went into effect, reflects U.S. frustration with the resilience of the Iranian economy. Destroying Iran’s power plants would absolutely hobble Iranian industrial production. But it would also constitute a war crime and would trigger catastrophic Iranian attacks against power plants and desalination facilities in the Gulf states. Trump may be able to shorten this war by intensifying it, but his options to do so would make the war much costlier for the global economy.
Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.
Section: (integrated-futures-initiative) Photo: Ali Hamed Haghdoust