The escalation of the conflict around Iran could become one of the most serious external challenges for Armenia in recent years. The country, which shares about 35 kilometers of border with Iran, risks facing not only the economic consequences of war but also a shift in the entire regional geopolitical configuration.

Although hostilities do not directly affect Armenian territory, the impact of the conflict is already being felt — through rising prices for certain goods, uncertainty in logistics, restrictions on exports from Iran, and potential changes in energy cooperation.

One of the first signs of the crisis has been changes in the food market. Following Iran’s introduction of export restrictions on a number of agricultural products, prices for certain categories of goods — primarily fruits and vegetables — have begun to rise in Armenia.

Experts warn that if the conflict drags on, the consequences could affect several strategically important sectors for Armenia at once — from trade and transit to energy security and migration.

Iran as a Strategic Trade Corridor

Iran remains one of Armenia’s key economic partners. The republic imports food, energy resources, chemical products, and construction materials from the country.

By the end of 2025, trade turnover between Armenia and Iran exceeded $768 million, increasing by 4.2% compared to the previous year. At the same time, Iran’s share in Armenia’s foreign trade continues to grow — from 2.4% in 2024 to 3.6% in 2025.

However, Iran’s importance to the Armenian economy is not limited to direct trade. Up to 25% of Armenia’s foreign trade cargo passes through Iranian territory in transit, making the southern route one of the country’s key connections to global markets. Alongside Georgia, Iran provides Armenia with access to markets in the Middle East and Asia. In wartime conditions, this corridor may come under serious pressure.

According to Armenia’s Ministry of Economy, however, the risk of a food shortage remains relatively low.

“The share of Iranian food products in Armenia’s domestic market is about 2.2%. Among the main imported goods are powdered milk and cream, animal feed, fruits, and vegetables. Live crayfish, frozen fish roe, and some quantities of chicken legs are also imported. Given the relatively small volume of goods imported from the Islamic Republic of Iran, the likelihood of a food shortage remains low”, the ministry told CCBS.

Nevertheless, economists note that the main issue lies not so much in trade volumes as in logistics.

Energy Factor and Investment Projects

Energy cooperation holds a special place in Armenian-Iranian relations. Since 2009, the two countries have operated a “gas-for-electricity” program. Under this scheme, Armenia supplies electricity to Iran in exchange for natural gas. For each cubic meter of gas, Armenia provides approximately 3 kWh of electricity.

According to expert estimates, about 20% of the natural gas consumed in Armenia comes from Iran, while the rest is imported mainly from Russia.

Economist Tatul Manaseryan believes the conflict could put pressure on several key areas of the country’s economic security.

“Iran is one of our main trade and economic partners. Goods from China and India also pass through its territory. If transport routes are restricted, this will inevitably affect the Armenian economy”, Manaseryan notes.

According to him, problems with cargo transportation are already emerging.

“The security of communications has already been disrupted. Freight carriers are facing serious difficulties. Iran has introduced certain restrictions on cargo transportation and exports. In addition, energy cooperation may also be at risk”, he says.

Economist Sos Khachikyan agrees that if the war continues, it will have some impact on Armenia, noting that Iran is one of the country’s two open borders, while borders with Azerbaijan and Turkey remain closed. However, he adds that Armenia’s trade turnover with Iran and the Middle East is not large. The country’s main economic ties remain with Russia, the Eurasian Economic Union, and the European Union. In this sense, a major direct negative impact on Armenia’s economy is unlikely, although some consequences in the energy sector are possible.

“The experience of the July 12, 2025 conflict between Iran and Israel showed that the impact of war on Armenia’s economy was relatively limited”, Khachikyan notes.

He also points out that military actions could negatively affect the investment climate, particularly projects such as TRIPP and American investments in Armenia.

“In 2025, certain agreements were reached related to TRIP and U.S. investments, especially in artificial intelligence and chip manufacturing. War may delay these projects or make their implementation more difficult. In other words, the structural changes in the economy expected from American investments may be postponed”, Khachikyan explained.

Migration Risk

In addition to economic consequences, the conflict may lead to migration changes. A flow of people is already being recorded at the Armenian-Iranian border, although it remains relatively small for now. Through the Meghri border crossing, Armenia is receiving primarily Iranian citizens who also hold passports of other countries.

Experts do not rule out that in the event of further escalation, the flow of migrants could increase significantly.

“Such a small country as Armenia will not be able to accommodate a large number of people. One percent of Iran’s population is about one million people”, warns Manaseryan.

Possible Shifts in Regional Balance

The war around Iran could have long-term geopolitical consequences for the entire region. Regional expert and Arabist Armen Petrosyan believes the conflict is already affecting Armenia’s foreign policy position.

“The southern route of external connections is currently not operating at full capacity. Due to the war, serious economic and logistical problems have arisen with at least two of Armenia’s five largest trade and economic partners — Iran and the United Arab Emirates”, Petrosyan notes.

According to him, after the conflict ends, the balance of power in the Middle East may change significantly.

The influence of the United States and Israel is likely to grow, as well as a certain strengthening of Turkey, which is trying to maintain neutrality while positioning itself as a mediator. At the same time, the influence of Iran, as well as China and Russia, may weaken.

“Armenia will have to adapt to a new geopolitical reality and shape its foreign policy in a changing balance of power”, the expert believes.

At the same time, according to Petrosyan, there are currently no direct security threats to Armenia.

“The challenge that previously existed in the form of a possible military attack from Azerbaijan is currently absent. This is linked to the preliminary signing of an Armenian-Azerbaijani peace agreement, the TRIPP project, and the increased regional presence of the United States”, he says.

However, certain risks may arise if Azerbaijan’s territory is used by Israel for military purposes.

A Region in Uncertainty

Experts emphasize that the consequences of the war are still difficult to fully assess. In addition to possible disruptions in trade, Armenia may face currency fluctuations, rising global prices for gold and energy resources, and shifts in migration flows.

Thus, the conflict around Iran is becoming not only a Middle Eastern crisis but also a factor capable of significantly influencing the economic and geopolitical dynamics of the entire South Caucasus.

Armenia Between Corridors and Geopolitics

The situation around Iran is particularly significant for Armenia because the country effectively lies at the intersection of several geo-economic projects.

One of the most discussed is the international North–South transport corridor, which is intended to connect Russia and Eurasian countries with markets in the Persian Gulf and India. Iran plays a key role in this system, and Armenia is seen as one of the potential transit routes.

If military escalation leads to long-term instability in Iran, this could significantly slow the development of these projects and weaken the importance of the southern direction for the Armenian economy.

At the same time, competition from other regional routes is increasing. In particular, the Middle Corridor (TRIPP), passing through Central Asia, the Caspian Sea, Azerbaijan, and Turkey, is being actively promoted. Under these conditions, Armenia risks ending up on the periphery of major transport flows if the southern route becomes blocked or unstable.

On the other hand, some experts believe the crisis could also create new opportunities. If regional actors are interested in maintaining alternative logistics routes, Armenia could strengthen its role as one of the few stable transit hubs between the Middle East and the South Caucasus.

 

Ultimately, the war around Iran is becoming not only a foreign policy test for Armenia but also a test of its ability to adapt to a rapidly changing regional reality. How effectively the country can leverage new opportunities and minimize emerging risks will largely determine its economic resilience and its place in the future architecture of the South Caucasus.

Journalist,

Marine Kharatyan

#ARMENIA

#IRAN

21.03.2026 11:05