Iran’s rial fell to a fresh record low on Tuesday on unofficial markets, with the US dollar quoted at about 1.47 million rials as authorities seek to defuse public anger over soaring prices.
The euro was trading around 1.72 million rials and the pound at about 19.94 million rials, traders said. The latest slide follows sharp swings since late December, when the currency’s plunge helped trigger protests in Tehran and other cities that have increasingly taken on a broader political edge.
The government has floated new relief measures after moving to curb access to subsidized foreign exchange used for importing basic goods, a system critics say has fueled distortions and rent-seeking while failing to contain inflation.
Over nearly two weeks, protests have spread from the markets and universities of major cities to the impoverished towns in Iran’s hinterland, killing dozens, according to rights groups.
The protests come at a precarious moment for Iran’s authoritarian government. Already weakened by its international foes, it now faces domestic unrest drawing an ever broader spectrum of the population.
A Weakening Economy
The Dec. 28 currency crash enraged shopkeepers, who were already reeling from months of currency depreciations that kept prices changing daily.
Over the past decade, inflation has lingered above 40 percent.
Iran is also under some of the world’s most intense sanctions, which have spurred inflation as the country struggles to access frozen funds abroad and foreign exchange, something exacerbated by its growing reliance on imports.
For households, the crisis is felt in the rising cost of everyday essentials. A weakening currency makes imports more expensive, pushing inflation into punishing territory. Wages lag behind, savings evaporate, and people turn to dollars, gold, real estate, and cryptocurrencies to protect what they have left.
But with the country largely offline, even crypto has become difficult to access or move. Economic frustration is widespread, and bazaars in major cities have closed in protest. The erosion of purchasing power is fueling the economic crisis and public anger.
Iran’s internal turmoil carries global implications. The next phase of the crisis will hinge on how the Iranian state responds to growing unrest and how outside powers choose to react. The White House has signaled a willingness to intervene militarily if violence against civilians escalates, and strikes on Iranian nuclear sites last summer show that these threats may not be idle.
A sudden collapse of Iran’s government would send shockwaves through global energy markets, affecting supply expectations, shipping, and investment decisions.
China, heavily reliant on that discounted Iranian crude, would face renewed uncertainty just when it lost its other cheap supplier: Venezuela.
And tensions around the Strait of Hormuz, one of the world’s most critical energy corridors, could raise insurance and transport costs even without direct disruption.
About a fifth of the global oil supply and a major share of LNG exports pass through this narrow waterway between Iran and Oman. Any instability in Iran always raises concerns because Tehran sits on one side of the Strait and has a large military presence in the area.
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