The Iranian Rial has entered a phase of full collapse as it sunk to a historic "rock bottom" against major world currencies on Tuesday. The currency’s plunge follows an explosion: spiraling domestic protests, an internet blackout, and current “effective immediately” 25% tariff (by President Donald Trump) on any country trading with the Islamic Republic.
In Tehran’s unregulated, open market where the real value of the currency is being tracked it was on record as the worst single-day devaluation in history, with citizens trapped in a state of financial panic.
The Numbers: An Historic Devaluation
The official “subsidized” rate, sustained by the Central Bank of Iran, remains untethered to reality, but the black market rates tell the story of economic carnage:
US Dollar (USD)
The Rial dipped to 1 USD for the first time across the psychological hurdle of 1,000,000 IRR, a level once considered thought outlandish.
Euro (EUR)
The euro soared higher and higher as European markets began pricing in a total regional conflict, reaching around 1,085,000 IRR. Gold: Rates of gold coin in Tehran have more than doubled during the past 48 hours with citizens scrambling to sell their Rials. Why the Rial is Collapsing. Economists cite three main reasons for this last "death spiral" of the Iranian currency:
Trump’s Threat of Tariffs
The sudden 25% tariff on businesses from any country doing business with Iran has in effect frightened the last big trading partners of Tehran, including China and the UAE. In the absence of the capacity to sell oil and foreign trade money, reserves of the Central Bank are drying up.
Internal Turmoil
With 646 official deaths in the nationwide protests, the regime is no longer focused on citizens but security. Banks in many of its key cities are still closed because of arson and civil unrest, disrupting the circulation of legitimate commerce. Capital flight: Rich Iranians and business owners are trying to flee the country with their wealth via cryptocurrencies and unofficial hawala networks, which makes the Rial hit even more.
Impact on the Streets: Hyperinflation 2.0
The Rial’s collapse has led to immediate, devastating inflation for the average Iranian. The price of fundamental goods, such as bread, cooking oil and medicine, has tripled in little more than a week. Many stores in Tehran neighborhoods have ceased to even show prices, and instead strike a deal in real time on the current hourly rate. “We’re not just fighting for our freedom on the street; we’re fighting for our meal,” one resident said in a satellite-linked message. “Forty-eight hours ago, the entire sum saved in our life vanished and nothing remained.”
The Government's Response
The Iranian authorities has called the currency crash a “psychological operation” of the United States. In a desperate effort to stabilize that market, the Revolutionary Guard has accused dozens of currency exchange dealers of "economic sabotage" and arrested dozens of them in the process. But with a major pullback on sanctions and domestic violence, experts say, the Rial can hardly recover.
