Iranian Rial Hits Record Low as Hormuz Tanker Strikes Continue

Iran’s currency broke past 2.7 million rials to the U.S. dollar on the free market Saturday, a fresh record low, the same day a tanker in the Strait of Hormuz took a direct hit from an unidentified projectile, according to Iran International’s live coverage.

The euro traded around 3.02 million rials and the British pound at 3.56 million, Iran International reported, while the UAE dirham — a widely used benchmark in Tehran’s informal currency market — hit 739,000 rials. The U.K. Maritime Trade Operations agency said the struck vessel suffered damage to its engine room but reported the crew safe and no environmental impact.

A currency in freefall

The dollar’s climb past 2.7 million rials extends a decline that has tracked almost in lockstep with the war’s economic toll. The rate stood near 1.47 million rials in January, according to Iran International, crossed 2 million for the first time in late August per Al Jazeera, and hit a record 2.25 million by early September, Iran International reported. By late September the rate had pushed above 2.5 million, driven in part by what Iran International described as deepening inflation pressures.

Iran’s annual inflation rate hit 77.2 percent in the April 21–May 20 reporting period, the Central Bank of Iran’s highest reading since 1942, Al Jazeera reported, with food inflation running even higher. Iran’s minimum monthly wage, set earlier this year at roughly 166 million rials, is now worth about $61 at Saturday’s exchange rate, down from roughly $75 when the wage was set — a reflection of how fast formal income is losing ground to the currency’s slide.

Tankers still being hit

Saturday’s strike is the latest in a string of attacks on shipping in and around the Strait of Hormuz that has continued despite periodic diplomatic contacts. U.S. Central Command said it destroyed five oil tankers tied to Iran’s Islamic Revolutionary Guard Corps on Sept. 8 — four in the Gulf of Oman and one near Kharg Island — after what CENTCOM said were failed Iranian missile attempts against a U.S. Navy warship, according to CBS News. CENTCOM struck three additional tankers the previous weekend under similar circumstances.

The renewed attack comes days after Washington rejected an Iranian proposal on securing the Strait of Hormuz and expelled an Iranian delegation, and as the Pentagon moves a third carrier strike group and roughly 10,000 additional troops toward the region.

Sanctions compounding the squeeze

The rial’s slide has coincided with an expanding U.S. sanctions campaign. The State Department said Oct. 1 that Operation Economic Outcast had added Iran’s rail, automotive and metals networks to the Treasury’s sanctions list, targeting intermediaries in the Middle East, East Asia and Europe that Washington says help Tehran evade existing restrictions. The UAE, Georgia and Iraq have since suspended Iranian airline operations, further narrowing the government’s remaining trade and travel channels.

Oil markets, meanwhile, have moved in the opposite direction. The Group of Seven’s agreement to release up to 100 million barrels of crude and diesel reserves briefly pushed Brent below $100 a barrel before prices recovered to roughly $102, a sign that global supply measures have so far done little to offset the risk premium built into Hormuz shipping.

For Iranians, the practical effect is a widening gap between wages and the cost of imported goods, fuel and food, nearly all of which are priced off the free-market dollar rate rather than the government’s official rate. Economists have pointed to the naval disruption of oil exports, sanctions on remaining industrial sectors and a shrinking foreign-currency supply as the main drivers, with no indication from either Tehran or Washington that a settlement on Hormuz security or the broader conflict is imminent.