Disruptions to Iranian imports could drive price increases in Armenia, economist warns

A potential reduction in imports from Iran could lead to higher prices in Armenia and disrupt key sectors of its economy, economist Aghasi Tavadyan told Panorama.am on Friday, warning that escalating regional tensions may have far-reaching consequences for both Armenia and the global economy.

Armenia maintains significant trade ties with neighboring Iran despite decades of international sanctions on Tehran. In addition to gas, cement, bitumen and steel rebar, Armenia imports a range of agricultural goods from Iran, including poultry, potatoes, tomatoes, apples, cabbage, carrots, cucumbers and other vegetables.

Imports from Iran totaled $680 million in 2025, up from $630 million in 2024. Many of these goods enter Armenia under the Eurasian Economic Union’s (EAEU) 0% import tariff regime, which came into effect in 2025.

Tavadyan said the evolving conflict around Iran remains unpredictable and could reshape global economic dynamics, particularly due to the strategic importance of the Strait of Hormuz and the Persian Gulf.

Around 20% of the world’s oil exports pass through the Strait of Hormuz, and the global oil trade is largely conducted in U.S. dollars. Gulf states typically reinvest their oil revenues in the U.S. economy, particularly in the technology sector, a system often referred to as the “petrodollar” arrangement.

“If the current security structure in the region weakens, the consequences for global markets could be significant and long-lasting,” Tavadyan said.

Oil prices have already surged amid the uncertainty, rising from about $60 per barrel two weeks ago to nearly $100, with the possibility of further increases.

Iran plays a critical role in Armenia’s energy balance. Armenia exports surplus electricity to Iran and receives natural gas in return, a swap mechanism that helps stabilize the country’s energy system.

Electricity, Tavadyan noted, must be consumed immediately after production because Armenia lacks large-scale storage capacity.

“In practice, Iran functions as a kind of ‘battery’ for Armenia’s electricity system,” he said. “Any disruption in this exchange could destabilize our fragile energy balance.”

Iran is also a supplier of construction materials such as cement and steel rebar, widely used in Armenia’s new housing projects.

“If supply declines while demand remains unchanged, prices will inevitably rise,” Tavadyan said.

He warned that Armenia’s economy is heavily dependent on a cluster of sectors, banking, construction and real estate, which together account for roughly 30% of GDP and are particularly vulnerable to external shocks.

A downturn in global construction activity, including potential instability in financial hubs such as Dubai, could trigger capital outflows and ripple effects across real estate markets.

“In a worst-case scenario, Armenia could face a correction similar to the 2008 financial crisis, with falling property prices and a sharp slowdown in economic growth,” he said.

Tavadyan also raised the possibility that prolonged instability in Iran could trigger migration flows into Armenia. Iran’s population exceeds 90 million, and some northern regions are home to ethnic groups with historical and cultural ties to the South Caucasus.

Given the uncertainty, Tavadyan urged the Armenian authorities to conduct rapid scenario planning to assess possible economic outcomes and prepare policy responses.

“The situation is volatile and evolving,” he said. “The government must promptly evaluate different scenarios, estimate their probabilities and understand how they could affect Armenia’s economy.”