On Wednesday, the Iranian rial fell to an all-time low of 1.8 million rials against the dollar, amid a fragile ceasefire with the United States and Israel, and increasing pressures on an economy weakened by war, blockade, and sanctions.
The Iranian news agency "ISNA" reported that the exchange rate of the rial dropped to a record level of 1,810,000 rials per dollar, reflecting a decrease of approximately 15 percent over the past two days. Iranian currency tracking websites showed varying rates between 1,760,000 and 1,810,000 rials per dollar.
Details of the Event
The rial had remained stable in the initial weeks of the war that began on February 28, partly due to low trading and imports into the country. However, the currency began to decline two days ago, amid rising demand for foreign currencies, including the euro and the UAE dirham.
Experts warn that the decline of the rial is likely to increase inflation in a country where many imported goods, from food and medicine to electronics and raw materials, are affected by the dollar's price.
Background & Context
The war is currently under a ceasefire, but the U.S. blockade continues to exert pressure on an already strained Iranian economy, leading to a significant cut in a major source of government revenue and hard currency through the halting or interception of oil shipments.
On Tuesday, the U.S. government announced sanctions on 35 entities and individuals for their roles in Iran's parallel banking system, accusing them of facilitating the transfer of tens of billions of dollars linked to sanctions evasion and what it described as Iran's sponsorship of terrorism.
Impact & Consequences
The Treasury Department launched the "Economic Fury" initiative to combat Iran, targeting a global network it claims helps sustain Iranian oil trade. It also sent warnings to Chinese banks threatening secondary sanctions if they continued to assist in Iranian oil transactions.
The Office of Foreign Assets Control (OFAC) warned that any company paying "fees" to the Iranian government or the "Revolutionary Guard" for passage through the Strait of Hormuz would face significant penalties.
Regional Significance
The recent decline follows months of a previous shock in the currency's value that fueled nationwide protests in January. At that time, the rial fell from about 1.4 million to 1.6 million against the dollar in less than a week, exacerbating public anger over rising prices and concerns about the country's economic future.
The Iranian economy has faced decades of sanctions, chronic inflation, and a growing gap between official exchange rates and open market prices. The weeks-long war has added new pressures on businesses, families, and state finances.
Prices for essential household goods had already begun to rise before the recent drop in the rial's value, increasing pressure on Iranian households even before the currency hit a new historic low. Over the past two weeks, those purchasing daily necessities have faced rising prices for milk, yogurt, cooking oil, bread, rice, cheese, and detergents.
These increases indicate broader inflationary pressures in the economy, driven by uncertainty following the war, supply disruptions, rising transportation and production costs, and the ongoing impact of the U.S. maritime blockade. The recent decline of the rial is likely to add further pressure in the coming days, especially on goods linked to imports, packaging, and raw materials.
The economic pressures have also extended to the labor market. The reformist newspaper "Shargh" reported that 500 workers at the "Pinak" company in Rasht, and 700 workers at a textile factory in Borujerd, were laid off since the beginning of the Iranian new year in late March after their contracts expired.
The announced layoffs heighten fears that rising costs, weak demand, and uncertainty following the war and blockade are forcing some companies to cut jobs or avoid renewing temporary contracts.
Iran is facing increasing economic and social pressures alongside the maritime blockade and the consequences of the war. Iranian media reported that more than 23,000 factories and companies have been affected.
Iran's Deputy Minister of Labor and Social Welfare, Gholam Hossein Mohammadi, stated that the damage has directly affected one million jobs, and the "Etemad Online" platform estimated that indirect effects have pushed one million more into unemployment.
Official data shows a surprising increase in unemployment benefit applications, with the number of applicants reaching 147,000 over the past two months, nearly three times the number recorded last year.