Iran is raising petrol prices as the government struggles to tackle a fuel shortage worsened by the war and the US naval blockade. Fuel in Iran is heavily subsidised and among the cheapest in the world, with motorists each entitled to a quota of 110 litres of petrol for IR30,000 ($0.013) per litre or less. Government spokesperson Fatemeh Mohajerani announced that while the quota will remain in place, Iran will from Tuesday double the price of any petrol consumed above that to IR100,000 per litre, from IR50,000 currently.

Despite possessing massive oil and gas reserves, Iran's limited refining capacity and overconsumption — propelled by ailing public transport and fuel-inefficient cars — have in recent years driven the government to import petrol to bridge a supply-demand gap. But the situation has become particularly acute since the start of the US-Israeli war in February. Iran lost part of its refining capacity in attacks on oil and petrochemical infrastructure early on in the conflict, while the US blockade on southern Iranian ports — largely in place since April — has impeded fuel imports, forcing the government to draw on its strategic reserves.

President Masoud Pezeshkian has repeatedly warned that the current subsidised rates cannot be sustained and are placing a severe strain on the economy. Economists have warned of the knock-on effects of a fuel price increase on prices of goods and services, at a time when year-on-year inflation is bordering on 90 per cent and the national currency has plummeted to its lowest-ever level of IR2.25mn to the dollar. Mohammad Sadegh Azimifar, head of the state-run National Iranian Oil Refining and Distribution Company, said domestic petrol production had recently increased to the "highest levels ever" but the country was still facing a daily shortfall of 10mn litres.

He said that "85 per cent of the population will not be affected by this price change, which will only apply to fuel consumption exceeding the standard pattern". The US and Iran have for months been locked in a stand-off over the Strait of Hormuz. Washington has over the past month shifted its strategy to applying economic pressure in an effort to isolate Tehran, expanding secondary sanctions against Iranian trading partners and threatening more.