Iran's Currency in Free Fall as Stock Market Hits Record High

Iran's economy is facing severe challenges due to its reliance on oil exports and the subsequent decline of its currency, the rial. The country has been hit by a series of sanctions, starting with being cut off from SWIFT in 2012, followed by the US leaving the Iran nuclear deal in 2018, and then US and Israeli airstrikes in February 2026 that blockaded Iranian oil exports at sea.

The result is that oil revenue has nearly stopped, and imports have shrunk. This has led to shortages of essential goods, including food and medicine, causing prices to skyrocket. Food prices rose by 72% year-on-year, while medical supplies increased by about 50%. The country's inflation rate reached 88.6% in June, up from 68% before the February war.

The government has responded by printing more money, which has further devalued the rial and fueled inflation. The Central Bank of Iran reported that liquidity rose by 53.3% to about 15.58 quadrillion tomans in the 2025-2026 fiscal year, while the monetary base increased by 61.5%, the highest since the 1970s.

Iran's exchange system and power structure have also contributed to the rial's decline. The country has multiple exchange rates, with an official preferential rate for chosen companies that import grain and medicine, a NIMA rate for most trade companies, and a free market rate for ordinary people and businesses. This creates easy profit opportunities for companies that can access cheap dollars at the official rate.

The Islamic Revolutionary Guard Corps (IRGC) is a major player in this game, controlling over 40% of Iran's economy through more than 800 companies. It also controls border crossings and port terminals and is involved in smuggling, with estimates suggesting it earns $12.4 billion to $25 billion annually from illegal oil and smuggling activities.

The rial has lost value every day since the war began, reaching a new low of 2.5 million per dollar on September 29. The Tehran Stock Exchange, however, has hit a record high of 7.595 million points, up 136,000 that afternoon. This is not a genuine boom but rather a result of people trying to hold onto something with value as the rial loses credibility.

The stock market's rise is largely driven by liquidity, and if sentiment turns or capital controls change, money can leave quickly. The government has removed the subsidized rate of 28,500 rials per dollar, unifying exchange rates but raising import costs and putting pressure on company margins. Iran is also turning to crypto and other settlement channels, with the Central Bank of Iran allowing exporters to receive payment in bitcoin and stablecoins like USDT.

The economic pain caused by runaway inflation is likely to lead to political unrest, which can hit markets further. The government has acknowledged this risk, with President saying 'When people are struggling to make a living, you cannot govern the country.'