Iran’s Currency Is Dying. Its Stock Market Just Hit a Record.

On September 29, in Tehran’s free market, a man in a gray jacket pushed three bundles of rials across the counter and got back a stack of dollars. The board read 2,500,000. That afternoon, the Tehran Stock Exchange closed at 7.595 million points, up 136,000. A trader picked up his tea and hit Enter. Two markets, two prices, one currency.

Since February, when war broke out, the rial has set new lows again and again. On September 2, one dollar bought 2.2 million rials. Twenty-seven days later, 2.5 million. Currency exchangers no longer looked surprised. They flipped the rate board faster. Pharmacies changed price tags on imported medicine. A housewife compared two bottles of cooking oil and picked the cheaper one.

The rial’s fall did not begin that day. In 2012, Iran was cut off from SWIFT. In 2018, the United States left the Iran nuclear deal and squeezed Iranian oil exports. In February 2026, U.S. and Israeli airstrikes hit Iran. The United States then blockaded Iranian oil exports at sea and launched what it called Operation Economic Outcast. Iran’s crude waiting offshore fell from about 29 million barrels in early September to about 15 million. Oil revenue nearly stopped.

Iran runs on oil. Oil money pays more than half of the government’s bills. Domestic industry is thin. About 72 percent of food comes from abroad. When dollar income dried up, imports shrank. Shelves emptied. Prices jumped. Food prices rose 72 percent year on year. Medical supplies rose about 50 percent. Iran’s Statistical Center put annual inflation at 88.6 percent in June. Before the February war, it was 68 percent.

The government printed money. In the 2025 to 2026 fiscal year, the budget deficit reached about 1,800 trillion tomans. The vice president said publicly that the government was forced to print money to cover the gap. Central Bank of Iran data showed liquidity up 53.3 percent from the previous fiscal year, to about 15.58 quadrillion tomans. The monetary base rose 61.5 percent, the highest since the 1970s. More rials chased fewer goods. The rial lost value every day.

Printing money was not the whole story. Iran’s exchange system and power structure made the fall worse.

Iran has several exchange rates. An official preferential rate goes to chosen companies that import grain and medicine. The NIMA rate covers most trade companies. Ordinary people and ordinary businesses buy dollars on the free market at much higher prices. The gap between these rates creates easy profit. A company that gets cheap official dollars imports goods and sells them at market prices. It pockets the difference. The Islamic Revolutionary Guard Corps is a major player in this game. It is a military force, but it controls more than 40 percent of Iran’s economy through more than 800 companies in energy, telecom, infrastructure, ports, logistics, and finance. It also controls border crossings and port terminals and is deeply involved in smuggling. Estimates put its illegal oil and smuggling income at $12.4 billion to $25 billion a year.

Sanctions shrink the pie. The IRGC and other privileged groups take bigger slices. Private factories and small businesses cannot grow or earn new foreign exchange. What little foreign exchange exists is consumed by arbitrage. Businesses and families that need dollars pay black-market prices. That pushes the market rate higher and makes the rial weaker. At the end of 2025, the government removed the subsidized rate of 28,500 rials per dollar to unify exchange rates. The move raised import costs and panicked the market.

The rial fell. The stock market rose. The logic is simple. When cash loses value fast, people try to hold something else. Capital controls block the easy route into dollars or gold abroad. The stock market is the largest local asset pool priced in rials. It absorbs the money that cannot leave.

This has happened before. Argentina’s inflation passed 200 percent while the Merval index soared in peso terms. Turkey’s inflation passed 80 percent and money rushed into Turkish stocks. Iran follows the same path. The currency lost credibility. Capital could not move freely. The stock market became a lifeboat for local savings.

The numbers show the split. This year, Iranian urban consumer prices rose about 55.5 percent. TEDPIX rose about 90.8 percent. After inflation, the real return was about 23 percent. For Iranians who earn and spend in rials, stocks preserved some purchasing power.

Measured in dollars, the picture changes. At the end of 2025, one dollar bought about 135,000 to 138,000 tomans on the free market. On September 30, it bought about 254,500. An investor who converted dollars into rials at the start of the year, bought assets tracking TEDPIX, and converted back at the end of September saw the index rise about 91 percent and the rial fall about 46 percent against the dollar. The final dollar return was about 1.2 percent. Over five years, the dollar value of Iran’s capital market fell more than 65 percent. Holding dollars beat holding stocks.

Iran’s stock boom is a nominal boom in rials. For investors who cannot move money abroad, it is the best bad option. For anyone counting in dollars, it is a currency illusion.

Three risks stand out. The rally runs on liquidity, not profits. If sentiment turns or capital controls change, money can leave fast. Exchange-rate unification raises import costs and squeezes company margins. If it moves too quickly, it can trigger another inflation shock and street unrest.

Iran is also turning to crypto and other settlement channels. The Central Bank of Iran lets exporters receive payment in bitcoin and stablecoins such as USDT. It no longer enforces strict foreign-exchange rules in the same way. That gives the economy some room. It also weakens the stock market’s status as the only safe harbor.

Social pressure is rising. Runaway inflation is crushing living standards. After the government cut fuel subsidies at the end of 2025, Iran saw its largest protests since 1979. Iran’s president said, “When people are struggling to make a living, you cannot govern the country.” Economic pain can become political unrest, and political unrest can hit markets.

The next morning in Tehran’s free market, a currency exchanger stuffed a bundle of rials into a plastic bag and snapped a rubber band around it. The board flipped to a new number. In the stock exchange hall, a trader picked up his black tea and hit Enter. Green numbers kept blinking. The two sets of numbers moved in opposite directions.