Iran International
Iran’s currency has lost half its value in just six months and is now at risk of losing its role as both a store of value and a functioning currency, as households and businesses increasingly shift prices, savings, and expectations toward the US dollar.
Just before the 12-day war with Israel in June 2025, one dollar traded for around 800,000 rials on Iran’s open market. It now trades at roughly 1,620,000.
The exchange rate has become a blunt signal of economic breakdown, turning the rial into a symbol of dysfunction and accelerating a broader retreat from it as a viable unit for planning daily life.
Policymakers routinely attribute currency surges in Iran to speculation and short-term panic. In reality, the collapse reflects deeper structural imbalances that have pushed the market into a state of chronic disequilibrium.
These pressures fall into two broad categories: chronic domestic problems—persistent budget deficits and a banking system plagued by structural imbalances and quasi-fiscal money creation that drive inflationary pressures—and external shocks, including tightened sanctions, recurring political crises, and the constant threat of war.
Together, these forces transform pessimistic expectations into self-fulfilling inflation.
A failing playbook
Faced with yet another currency crisis, the government has reverted to familiar, largely ineffective tools that may offer brief relief but ultimately deepen instability.
One tactic is “news therapy”—attempts to manage inflationary expectations through signaling and narrative control. Such signals only work when backed by consistent policy, institutional credibility, and public trust.
In Iran, years of broken promises and contradictory actions have eroded that trust, leaving each new round of reassurance less effective than the last.
Officials seek to suppress demand, urging people to “refrain from buying dollars” and insisting that “everything is under control.” But such messages often reinforce pessimism, as an already skeptical public reads them as a warning of further depreciation.
Currency injections—flooding the market to push prices down—have increasingly become a channel for rent distribution and corruption. At best, they buy time at enormous cost. Without addressing root causes, they intensify the recession-inflation cycle and pave the way for sharper future devaluations.
Millions left behind
These currency shocks have devastated daily life for ordinary Iranians, eroding purchasing power and making normal economic planning nearly impossible.
High inflation hits fixed-income households hardest—roughly half of Iran’s workforce—whose wages lag far behind rising prices. Each jump in the dollar translates into lower living standards, pushing millions deeper into economic precarity.
Business owners and large investors, by contrast, are often able to convert assets into more portable stores of value.
Official data point to massive capital flight—around $20 billion in 2024. In the few months prior to the June 2025 war, net outflows reached roughly $9 billion. Given the succession of shocks and Iran’s semi-shutdown state this year, a figure approaching $40 billion for the rest of 2025 appears plausible.
That exodus, in turn, feeds further instability and pushes the dollar higher. In this environment, those lacking the knowledge, access, or means to protect their assets face a growing risk of being left behind.
The specter of dollarization
The rial’s free fall is not merely a temporary crisis; it reflects deep structural failures in Iran’s economy.
Sustainable currency stability would require reforms spanning foreign policy, fiscal discipline, and the restoration of public trust. Instead, Iran’s central bank has shifted away from monetary discipline toward currency-market arbitrage and large-scale gold auctions.
These measures may buy time or temporarily suppress prices, but they contradict basic principles of monetary governance and expose the extent to which the central bank has been reduced to a tool for managing budgetary and political failures.
As trust in the rial as a store of value and unit of account erodes, economic actors will increasingly rely on foreign currencies, further hollowing out the national currency’s role. Without fundamental change, the trajectory points toward dollarization.
For now, the rial’s free fall continues—and Iranian society, especially those least able to adapt, is paying the price of today’s instability and tomorrow’s risk of collapse.
Iran is now enduring the country’s longest and most comprehensive internet disruption on record. Its impact has stretched far beyond blocked platforms and loading screens, pushing many businesses to a point of no return.
Economists estimate Iran’s digital economy generates roughly 30 trillion rials (about $42 million) a day. While modest on paper, that figure represents the livelihoods of small and medium-sized enterprises that operate almost entirely online.
The Tehran Chamber of Commerce estimates that at least 500,000 Instagram-based shops operate in Iran, supporting around one million jobs whose sales effectively drop to zero without internet access.
The collapse began when the signal died
Industry data reviewed by trade groups show daily losses running into billions of rials, with the Chamber reporting revenue declines of 50% to 90%. But some analysts say even those figures understate the damage.
“Where does this figure even come from?” IT expert Amin Sabeti told Iran International. “These businesses operate on Instagram. When people have no access to Instagram, one hundred percent of their sales are gone.”
Sabeti said the lack of precise data had itself become part of the crisis. “What we do know is that Instagram and WhatsApp are widely used by small businesses, and many have now lost customers completely,” he added. “For some people, their entire livelihood depended on these platforms.”
In Iran, platforms such as Instagram, Telegram and WhatsApp function not only as messaging tools but as storefronts, marketing channels and payment gateways.
Analysts estimate more than 40 million active users rely on them, making social media the backbone of e-commerce, especially for home-based businesses, informal retailers and women-led ventures.
“In many cases, people have gone bankrupt because they had issued cheques that can no longer be covered,” Sabeti said. “The reality is that a large portion of online businesses that relied heavily on Instagram have been wiped out.”
One Tehran-based online clothing seller told the news site Dideban Iran that her sales collapsed. After just one week of disruption, she laid off all her workers, shut down her workshop and sold her sewing machines. “I’m bankrupt,” she said.
Another online seller said most digital businesses lack the reserves to survive even days without revenue. “When the internet goes,” the seller said, “whatever tiny capital we have disappears.”
Silence from businesses
Iran International contacted several large and small online businesses to ask about the impact of the blackout. None replied. Messages were not even seen — an absence that spoke louder than any quote.
A few voices surfaced briefly on X. One user wrote that a friend who teaches languages online could no longer earn enough to cover monthly expenses. “Online business is not just online shops,” the post said. “Thousands of jobs depend on the internet, and they’ve been destroyed.”
Another described producers already weakened by months of economic pressure. “In our industrial area, someone with 15 years of production experience is renting out his workshop as a spare-parts warehouse,” the post read. “Last year we had 13 workers. Now we have three.”
Economists warn the damage will outlast restored connections. Prolonged shutdowns erode trust, deter investment and stall technological development. Many business owners say they have lost not only their capital but the will and the means to start again.
Women, who make up a significant share of Iran’s home-based digital workforce, are among the most exposed. For many, online trade was the only viable entry into the economy. With that channel severed, unemployment follows quietly.
“If this situation continues, it can really push the digital economy toward destruction,” said Reza Olfatnasab, head of the union of virtual businesses.
Numbers collide, blame follows
As businesses slipped into silence, the argument over numbers intensified.
Communications Minister Sattar Hashemi said recent outages were inflicting about 5,000 billion rials a day in direct losses on the core digital economy and nearly 50 trillion rials across the wider economy. Around 10 million people depend directly or indirectly on the sector, he said, adding that the average resilience of internet-based businesses is just 20 days.
The hardline daily Kayhan dismissed those estimates as “fabricated figures,” accusing the communications ministry of deflecting responsibility and arguing that officials who failed to build a “secure and lawful” network should be held accountable.
Industry bodies offered competing assessments. Analysts say the gap exposes a deeper problem than the shutdown itself: Iran lacks any transparent, standardized system to measure its digital economy.
For many business owners, however, the debate over billions has already arrived too late. Their screens are dark, their messages unread and their income, whatever the final number, already gone.
