Iran’s rial continues to fall and has reached the lowest level in its historical record. As a result, the U.S. dollar exchange rate in the open market has surpassed 1.32 million rials.
This sharp decline comes less than two weeks after the rial crossed the 1.2 million thresholds against the dollar for the first time, a trend that has accelerated under the pressure of sanctions and escalating regional tensions.
In a report, the Associated Press news agency addressed the unprecedented decline in the value of Iran’s national currency, writing that currency traders in Tehran on Thursday, December 18, quoted rates higher than 1,320,000 rials per dollar, indicating the rapid pace of the rial’s depreciation since December 3, the date when it reached a historic record.
Runaway Price Increases and the Shadow of Hyperinflation Over Iran’s Economy
Additional pressure on household livelihoods
The rapid decline of the rial has intensified inflationary pressures and fueled higher prices for food and essential daily goods, a trend that economists warn could worsen following recent changes in gasoline prices.
Iran’s government introduced a new price cap for gasoline on Saturday, marking the first major change to the fuel pricing system since 2019, the year when gasoline price hikes sparked nationwide protests that were reportedly met with a crackdown leaving more than 1,500 people dead.
Under the new system, drivers still receive 60 liters of gasoline per month at the subsidized price of 15,000 rials and another 100 liters at a rate of 30,000 rials, but consumption beyond this quota is now calculated at a price more than three times the initial subsidized rate. Although gasoline in Iran remains among the cheapest in the world, experts warn that this change, amid the rapid collapse of the rial, could further drive up prices. It should be noted, however, that the base salary of a person with two children is around 115 dollars per month, which is also among the lowest rates in the world.
Diplomatic deadlock and the shadow of renewed conflict
The collapse of the rial has coincided with the halt of efforts to revive negotiations between Tehran and Washington over Iran’s nuclear program. At the same time, concerns persist about the possibility of renewed conflict following the 12-day war in June between Iran and Israel.
Many Iranian citizens are worried about the expansion of tensions and the potential involvement of the United States in a larger confrontation, a factor that analysts say has fueled greater uncertainty in the markets.
Sanctions and the historic collapse of the national currency
Iran’s economy has been under international sanctions for years, especially after Donald Trump withdrew from the 2015 nuclear agreement in 2018. At the time the deal was implemented, which led to the lifting of some sanctions in exchange for strict limits on uranium enrichment, the dollar rate was around 32,000 rials.
With Trump’s return to the White House for a second presidential term in January, his administration revived the “maximum pressure” policy and imposed broader sanctions on Iran’s financial sector and energy exports. U.S. officials have said that Washington has once again targeted companies involved in Iran’s oil trade, including discounted sales to Chinese buyers.
Pressure also increased in late September, when the United Nations Security Council used the so-called “snapback” mechanism to reimpose sanctions related to Iran’s nuclear program. Although U.S. sanctions against Iran had already been in place, the psychological impact of the reactivation of UN sanctions has had significant economic consequences for Iran and its national currency.
Economists warn that the continued fall of the rial could create a vicious cycle of rising prices and declining purchasing power, particularly for essential goods such as meat and rice that play a key role in Iranian households’ food baskets. For many people, the rial reaching this new record is a sign of how distant any economic relief remains amid ongoing diplomatic deadlock and intensified sanctions.
