The Iranian rial has been on a wild ride, and not in a good way. Over the years, U.S. sanctions have squeezed Iran’s economy, cutting off access to global banking, limiting oil exports, and making it harder to do business with the rest of the world. As a result, the rial has taken hit after hit, losing value at an alarming rate. 

Every day, Iranians feel the pinch—prices for basic goods skyrocket, savings shrink, and financial stability feels like a distant dream. While the government tries different tactics to stabilize the currency, the pressure from sanctions keeps pushing it down, leaving many wondering if there’s any way out of this economic spiral. Let’s find out more.

Timeline of US Sanctions Against Iran and Their Impact

The United States has imposed various sanctions on Iran over the years, with significant consequences for the country’s economy and currency. The continued enforcement of those sanctions has contributed to economic instability, making it difficult for Iran to stabilize its currency and financial system.

• 2018: The Trump administration withdrew from the Joint Comprehensive Plan of Action (JCPOA), reimposing sanctions on Iran. As a result, the rial rapidly lost value, dropping over 90% against the U.S. dollar.
• 2019-2021: Additional sanctions targeted Iran’s banking sector, oil exports, and military funding. The rial continued to weaken, and inflation soared.
• 2022- Present: The Biden administration has maintained many sanctions while also pursuing diplomatic efforts. However, the rial has hit record lows, surpassing 700,000 rials per U.S. dollar in 2024.

How Sanctions Have Affected Iran’s Banking and Forex Markets

U.S. sanctions have significantly impacted Iran’s banking and foreign exchange (forex) markets. 

Some of the major consequences include:

• Banking Restrictions: Iran has been cut off from the SWIFT financial messaging system, making it difficult for businesses to conduct international transactions.
• Forex Market Crisis: Due to restrictions on foreign currency inflows, Iran’s forex market has become highly volatile. The official exchange rate set by the government differs widely from the black-market rate.
• Hyperinflation: The lack of stable forex reserves has led to rising inflation, further weakening the purchasing power of the rial.
• Limited Foreign Investment: With foreign companies wary of doing business with Iran, capital inflows have decreased, exacerbating economic instability.

The Connection Between Oil Exports and Rial Devaluation

Iran’s economy is heavily reliant on oil exports, which have been a key factor in the rial’s fluctuations.

• Oil Export Decline: Despite efforts to bypass sanctions, Iran has struggled to sell oil on the international market, reducing the government’s foreign currency reserves.
• Revenue Challenges: Even when oil exports increase, lower global oil prices and the restrictions on accessing revenues limit Iran’s ability to stabilize the economy.
• Import Costs and Inflation: A weaker rial means that imports become more expensive, driving up inflation and making basic goods unaffordable for many Iranians.
• Competitiveness of Exports: A devalued currency can sometimes benefit exporters by making Iranian goods cheaper on the international market. However, ongoing trade restrictions limit this potential advantage.

Iran’s Attempts to Stabilize Its Currency Amid Sanctions

Iran has taken multiple measures to try to stabilize the rial, but with limited success.

• Monetary Policies: The government has introduced multiple exchange rates to control the currency crisis. However, these measures have often led to corruption and inefficiencies.
• Gold and Cryptocurrency Trading: Some Iranians have turned to gold and cryptocurrencies to protect their wealth, but this has not been sufficient to offset the rial’s decline.
• Bilateral Trade Agreements: Iran has attempted to conduct trade in alternative currencies, such as the Chinese yuan and Russian ruble, to bypass U.S. sanctions.
• Economic Diversification: Efforts to reduce dependence on oil exports and boost manufacturing and agriculture have been slow to materialize due to structural issues and a lack of investment.

Future Prospects: Will the Rial Recover or Continue Declining?

The future of the Iranian rial remains uncertain, with both challenges and potential opportunities ahead:

• Continued Decline: If U.S. sanctions remain in place, inflation persists, and Iran fails to stabilize its economy, the rial will likely continue to weaken.
• Stabilization Potential: If diplomatic negotiations lead to sanction relief, Iran may regain access to international markets and banking systems, allowing for economic recovery.
• Geopolitical Factors: Any shifts in regional stability, nuclear negotiations, or changes in global oil prices could significantly impact the rial’s trajectory.
• Domestic Economic Reforms: Effective monetary policies, reduced corruption, and diversification of the economy could help strengthen the rial in the long run.

Final Words:

The Iranian rial has been on a downward trajectory due to U.S. sanctions, economic mismanagement, and global financial restrictions. While Iran has made various attempts to stabilize its currency, the challenges remain significant. 

Without substantial changes in international relations and domestic policies, the rial is likely to remain volatile. However, any easing of sanctions or economic reforms could provide a path toward recovery and stabilization in the future.

Ultimately, the future of the rial will depend on a combination of diplomatic efforts, economic resilience, and the ability to adapt to an evolving global landscape.