Iran's Currency Hits Record Low as Sanctions Bite

The Iranian rial has reached an all-time low against the US dollar, hitting 2 million rials to one dollar on the open market. This marks a sharp decline even by the rial's turbulent standards, with a drop of around 5% in just over five weeks.

The currency's trajectory looks alarming when zoomed out further. In late January, the rial set what was then considered a record low at 1.5 million per dollar. By late April, heightened geopolitical tensions pushed the rate to 1.81 million.

US economic sanctions remain the primary engine behind the rial's collapse. The sanctions regime restricts Iran's ability to sell oil on international markets, limits access to the global financial system, and deters foreign investment. Washington has steadily tightened the screws over the course of this year, targeting not just Iranian entities but also third-party actors who facilitate sanctions evasion.

The rial's collapse is feeding into a vicious cycle with inflation, which has exceeded 40% year-on-year, with food prices spiking particularly hard. The central bank's foreign reserves are under significant strain due to sanctions, limiting the government's ability to intervene in currency markets.