The rial’s depreciation against the dollar in Iran is deepening under the pressure of sanctions and the war’s impact on foreign trade. The dollar rose to as much as 2.03 million rials on the free market, while the rial has lost approximately 22 percent of its value compared with its level on February 28 and more than 42 percent since the beginning of the year.
The new sanctions package announced by U.S. Treasury Secretary Scott Bessent on August 24 targets financial channels and foreign trade networks alongside oil revenues. These measures are increasing pressure on the networks that enable Iran to trade oil and transfer the proceeds into the country.
Sanctions target oil and financial channels
Washington’s policy of economic pressure on Iran began in 2018. Its objectives included reducing Iran’s oil revenues, isolating the country from the international financial system and increasing the economic cost.
The sanctions took effect in two stages. In the first stage, Iran’s access to dollars, gold and precious metals was restricted, while the steel, coal, aluminum, automotive and civil aviation sectors were also placed under sanctions.
The second stage, implemented on November 5, focused on oil and energy trade. Numerous banks, including Iran’s Central Bank, were added to the sanctions list, with the aim of narrowing Tehran’s international trade channels.
The goal of completely halting Iran’s oil trade was not achieved. To circumvent the sanctions, Tehran has used methods including a shadow fleet, front companies, alternative payment channels and oil trade through China.
War increases pressure on the exchange rate and foreign trade
The rial’s decline had already continued for a prolonged period before the war because of sanctions, high inflation, capital outflows and problems with foreign-exchange revenues. When the war began on February 28, 2026, the dollar was trading at approximately 1.66 million rials on the free market.
Following an understanding in June that envisaged the start of negotiations with the United States to end the war, the exchange rate fell to as low as 1.54 million rials. After the fighting resumed, the dollar exceeded the 2 million rial threshold.
The dollar’s rise to 2.03 million rials represents an increase of approximately 400,000 rials compared with the prewar level. Given that the dollar traded at around 60,000 rials in 2018, the rial has lost approximately 30 times its value against the dollar since then.
Exchange-rate movements are increasing the risk of price rises for imported goods, raw materials, medicines and consumer products. Citizens and companies turning to dollars and gold instead of the rial amid economic uncertainty are also increasing pressure on the exchange rate. However, it remains unclear whether the depreciation will translate into Washington’s political objectives.
Oil production and China links under pressure
The war is putting pressure on Iran’s oil exports, maritime shipping, import routes and production capacity. The naval blockade is harming Iran’s maritime trade.
According to the Organization of the Petroleum Exporting Countries’ monthly report dated August 2026, Iran’s crude oil production stood at 2.478 million barrels per day in July. This level is approximately 25 percent lower than before the war.
Changes in import routes are raising transport and insurance costs, while supply remains limited despite rising demand for foreign currency. The new sanctions policy also targets the networks that facilitate not only the sale of oil but also its transportation, the collection of payments and the transfer of revenues to Iran.
Because China is one of the major buyers of Iranian oil, possible secondary sanctions against Chinese companies and banks are a critical issue. Washington aims to expose countries and companies that maintain commercial and economic relations with Iran to secondary sanctions as well.
Political impact of economic pressure remains uncertain
Washington plans to increase economic pressure to reduce Iran’s ability to withstand it and force Tehran to make concessions in negotiations.
Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, said they would target the interests of countries assisting the United States’ economic war. Iranian Foreign Minister Abbas Araghchi said the previous sanctions policy had failed and that new economic pressure would not force Iran to surrender.
In the coming period, key issues will include the extent to which Iran can sustain its oil exports, how China and other trading partners respond to U.S. pressure, and whether the economic crisis changes the political calculations of Iran’s leadership.
