Zagros lost to Kuwait SC 36-24 in Group A.
The Iranian team will face Qatar’s Al-Arabi on Friday.
Foolad Mobarakeh was also defeated against Qatar's Al-Wakrah 33-31 in Group B.
Foolad will meet Al-Wehdah of Saudi Arabia on Friday.
The competition is being held in Samcheok, South Korea from November 7 to 17.
The Asian Handball Club League Championship is the official competition organized by Asian Handball Federation for the men's handball clubs of Asia, and takes place every year.
In addition to crowning the Asian champion, the tournament also serves as a qualifying tournament for the IHF Super Globe.