Iran’s currency has hit a record low as the country faces tightening international sanctions, compounding the country's economic woes amid severe water shortages and a worsening energy crisis.

The rial slid to 1,207,500 to the US dollar on Wednesday, according to currency tracker Navasan, extending a depreciation trend that has deepened since international sanctions were imposed in September. 

In August, the rial crossed the threshold of 1 million to the dollar for the first time. By September — after the European signatories to the 2015 Iran nuclear plan reimposed UN sanctions on Iran — the currency reached 1,130,000 rials to the dollar. 

Trump squeeze

After entering office in January, US President Donald Trump signed an order reviving his previous "maximum pressure" campaign on Iran, targeting oil exports and financial networks linked to the country. The strain intensified after the June 2025 war between Israel and Iran.

The currency has been in near-constant decline since 2018, when the US withdrew from the Joint Comprehensive Plan of Action and reimposed sweeping sanctions on Iran. In July 2018, the rial traded around 100,000 to the dollar. Since then, restrictions on oil exports and a lack of access to foreign currency and banking channels have weakened the currency and pushed inflation higher. 

For Iranian citizens, the impacts of inflation have been severe. Food and beverage price inflation was reported at 66% in November compared to the same month last year, according to the Statistical Center of Iran, as the currency's collapse has caused food imports to skyrocket.

Food prices soar

In October, prices across a broad basket of goods and services had increased by 50% from the same month in 2023. Iranians' economic woes worsened further after the government began phasing out longstanding fuel and subsidy programs. In May, the government partially removed diesel fuel subsidies, forcing many drivers and commercial transport operators to pay market prices when their quotas run out. Widespread fuel subsidy cuts in 2019 led to large-scale protests that Iranian authorities quashed using deadly force. 

Also in October, Iranian Minister of Labor and Social Affairs Ahmad Meydari announced that the government intends to stop paying cash household subsidies that will impact over 20 million people. The cuts target the top three income deciles, but have still faced pushback from Iranian lawmakers, who have warned that the cuts could impact vulnerable populations.

Tehran has tried to calm markets with periodic interventions, but they have thus far offered short-term relief. In August, the parliament’s economic commission signed off on a plan to remove four zeros from the rial in an effort to streamline transactions. And in September, the semiofficial Fars News Agency reported that the Central Bank injected $500 million into the foreign exchange market to relieve pressure on the rial, but the injection did not appear to reverse its slide.

In March Iran’s former economy minister, Abdolnaser Hemmati, was ousted following a parliamentary vote of no confidence amid mounting frustration over soaring inflation and rising living costs.

Compounding Iran's financial strain are the country's worsening water and energy crises. After five consecutive years of drought and years of mismanagement, several of the dams supplying Tehran have fallen to critically low levels. The shortages have forced the government to spend more on emergency water and energy measures. They have also curtailed power generation and disrupted agriculture and industry, driving up costs across the country.

Water emergency