Iranian Rial Slides to Historic Lows as US Sanctions Bite, Inflation Surges

The Iranian rial has plunged to unprecedented lows, underscoring the depth of Iran’s economic crisis as tightening U.S. sanctions, regional tensions and persistent inflation continue to batter the country’s fragile financial system.

In Tehran’s open and unregulated currency market, the U.S. dollar was trading at just under 1.3 million rials late Wednesday, according to the currency-tracking website Bonbast and figures cited by three exchange offices operating via Telegram channels. Traders said the rate was hovering near an all-time record reached earlier in the week.

The latest collapse marks another grim milestone for a currency that has been in near free fall for years. Since 2018, when then–U.S. President Donald Trump withdrew from the landmark nuclear agreement during his first term, the rial has lost more than 95% of its value against the dollar. 

Trump’s return to the White House this year has brought a renewed push for “maximum pressure,” reviving sweeping economic sanctions and deepening Iran’s isolation.

The pressure on the rial has intensified over the past year amid broader international sanctions, dwindling oil exports and heightened geopolitical risks. Markets were further rattled by a 12-day war between Iran and Israel, followed by direct U.S. involvement when American forces struck key Iranian nuclear facilities in June.

Oil exports, Tehran’s primary source of hard currency, have declined sharply, squeezing dollar inflows just as demand for foreign exchange has risen. Importers are scrambling to settle outstanding trade transactions before the end of the calendar year, while a recent increase in gasoline prices has added to domestic inflationary pressures.

“These overlapping shocks have pushed the parallel market to the brink,” Kamal Seyed Ali, former deputy governor of Iran’s central bank, told the government-affiliated daily Hamshahri. He pointed to high inflation, reduced export revenues and mounting uncertainty as key drivers behind the currency’s slide.

Iranian officials have openly acknowledged the difficulty of stabilizing the economy under current conditions. Last week, Economy and Finance Minister Ali Madani-Zadeh warned that the dollar could continue to rise as long as tensions with Israel persist, fueling faster inflation across the economy.

Controlling prices in Iran today, he said, is akin to “performing surgery in a field hospital during the Iran-Iraq war, under constant bombardment,” according to remarks carried by the state news agency.

Inflation has remained stubbornly high, eroding purchasing power and pushing more Iranians toward the informal currency market, which most citizens rely on as a real-time indicator of economic health.

Iran operates multiple exchange rates simultaneously, a structure that has long distorted the economy. A heavily managed official rate, set by the Central Bank of Iran, is accessible only to select institutions and companies. In contrast, the far higher parallel-market rate is used by the majority of households and businesses, and is widely seen as the true barometer of economic confidence.

As the rial continues its downward spiral, economists warn that further depreciation could trigger a new wave of price hikes, deepen social pressures and complicate the government’s already narrow policy options.

For many Iranians, the record-low exchange rate is more than a financial statistic, it is a stark reminder of an economy trapped between sanctions, conflict and inflation, with no clear relief in sight.

FILE PHOTO: Iranian rials, U.S. dollars and Iraqi dinars at a currency exchange shop in Basra, Iraq, November 3, 2018. Picture taken November 3, 2018.