Iranian rial hits record low as US prepares new sanctions

Iran's rial fell to a record low against the US dollar today (24 August) as Washington prepared to announce additional sanctions aimed at putting further pressure on an economy already weakened by years of sanctions and a US naval blockade.

The rial fell to 2.02 million against the US dollar when currency trading opened. Iran's official Central Bank exchange rate was around 1.5 million rial per dollar, but most Iranians use the market rate for their transactions.

The currency had been under pressure even before the United States and Israel launched attacks on Iran on 28 Feb, when the country was already dealing with double-digit inflation and negative economic growth. It has since repeatedly reached new lows as nearly six months of war have further damaged the economy.

The rising costs have made everyday necessities increasingly unaffordable for Iranians. Since the war began, rice prices have increased by about 60%, while beef prices have risen more than 150%. The International Monetary Fund expects Iran's economy to shrink by more than 5%.

Despite the economic hardship, there have so far been no clear signs of significant political pressure on Iran's leadership. Tehran retains an important strategic advantage through its attacks and threats against ships in the Strait of Hormuz, which have brought traffic through the crucial waterway close to a standstill.

The disruption has affected the global economy and increased pressure on US President Donald Trump ahead of congressional elections.

The conflict has increasingly turned into a struggle over control of the strait, through which about one-fifth of the world's traded oil passed before the war. Iran is now refusing to fully reopen the waterway unless it is allowed to charge ships.

Iran and Oman, which lies on the opposite side of the strait, are reportedly nearing an agreement on a plan to jointly manage the strategic waterway. Oman's foreign minister is scheduled to visit Iran on Tuesday.

Seeking to break the deadlock, the Trump administration said it would announce stronger sanctions on Monday, including secondary sanctions against countries that continue doing business with Iran.

"President Trump decimated Iran's economy to a point where the rial has never been weaker and inflation has rarely been higher," US Treasury Secretary Scott Bessent wrote yesterday in an opinion article published by the Financial Times.

He said Iran's government was now relying on "the self-deception of fearful nations" that still believe accommodating aggression could lead to lasting peace.

The United Arab Emirates, one of Iran's major trading partners and its largest source of imports, announced last week that it was suspending all trade with Iran.

Iranian Foreign Ministry spokesperson Esmail Baghaei warned today that any further escalation would have consequences.

"Our hands are not tied," he told reporters in Tehran.

Pakistan, which played a key role in brokering a 60-day ceasefire in June, sent a high-level delegation to Iran on Monday to discuss efforts to end the conflict, the military said.

In central Tehran, however, 73-year-old Sadegh Mahmoudi said he saw little prospect of a settlement. He stood in a line of about a dozen people to exchange his remaining savings for US dollars as protection against further declines in the rial.

"There is no hope for a deal and peace," he said.