Iranian authorities are preparing the public for a possible substantial increase in fuel prices as the government struggles to finance heavily subsidised petrol during the continuing war and intensified US sanctions. A final decision is expected in the coming weeks.
The government has not announced a final policy. Officials are weighing options ranging from unchanged prices with rationing to broader price liberalisation, while seeking to preserve the cheapest fuel tier for vulnerable households.
Why fuel prices are under review
Iran’s population consumes about 135 million litres of fuel a day, while authorities said production was about 121 million litres daily earlier this month. Fuel imports have stopped because of the war, adding to the pressure on domestic supplies and public finances.
The International Monetary Fund forecasts that Iran’s gross domestic product will contract by 5.4 percent in 2026. President Masoud Pezeshkian said the government was trying to protect people from the country’s problems while blaming external pressure for making that task harder.
Related coverage: US strikes on Iran trigger rise in oil prices and fall in global stocks amid Hormuz tensions.
What the current system provides
Petrol is sold through fuel cards under three price categories for personal vehicles: 15,000 rials per litre for the cheapest tier, 30,000 rials for the second tier and 50,000 rials for the third. The cheapest quota is 60 litres a month.
The second-tier quota was reduced from 100 to 70 litres at the start of the current calendar year in late March, then cut again to 50 litres after fighting between Iran and the United States resumed in July over the Strait of Hormuz. Imported, free-zone and newly registered vehicles face the highest-price tier.
Three options and the inflation risk
Esmail Saghab-Esfahani, the government’s head of energy optimisation, said officials were considering three approaches. Pump stations could keep prices unchanged but close after exhausting their allocations; all Iranians, including people without vehicles, could receive about 30 litres a month at the lowest price; or fuel prices could be liberalised for everyone.
More context: Trump Criticises Oil Giants as US Drivers Face Higher Petrol Costs.
The government has reportedly considered a liberalised price of 872,000 rials per litre, close to refinery production costs. Officials have warned that higher fuel prices could sharply raise transport and logistics costs, pushing up prices for consumers. A planned pilot in 204 pump stations in Kerman was cancelled at the last minute.
Why authorities are proceeding cautiously
Higher petrol prices have previously triggered unrest, including nationwide demonstrations in 2019. Similar measures preceded protests in January 2026, making the timing and design of any new policy politically sensitive.
First Vice President Mohammad-Reza Aref said the 60-litre cheapest tier should remain, while the second quota could gradually decline. He said prices should eventually be liberalised transparently, with the proceeds directed to vulnerable people. Official figures released in July showed prices were 88 percent higher than a year earlier and food inflation exceeded 128 percent.
Also read: India sends gasoline to Russia as fuel shortages spread.
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