Iran's rial hits record low as US prepares fresh sanctions on Tehran

Currency slide and sanctions backdrop

Iran's rial has fallen to a record low against the US dollar on the informal market, as Washington prepares to announce a new round of sanctions aimed at further squeezing Tehran's economy. According to the Associated Press, the rial dropped to 2.02 million per US dollar on Monday. The official Central Bank rate stood at around 1.5 million rials per dollar, but the market rate is what most Iranians use.

The latest slide comes as US Treasury Secretary Scott Bessent prepares to unveil what he has described as an "economic D-Day" against Iran. The planned measures are expected to expand Washington's efforts to cut off Iran's remaining financial and trade links and increase pressure on countries and companies that continue doing business with Tehran.

The rial has been under pressure from years of sanctions, but the economic strain has intensified during the nearly six-month conflict. A US naval blockade has severely restricted Iran's oil exports, while disruptions to trade and shipping have further limited Tehran's access to foreign currency. The weakening rial has also made essential imports more expensive for Iranian consumers. The record-low exchange rate comes as Washington seeks to make the economic cost of the conflict even greater for Tehran.

The new US measures are expected to target Iran's remaining economic lifelines and could also affect countries that continue trading with the Islamic Republic. China, Turkey and India are among Iran's major trading partners that could face greater pressure. China is particularly important because it remains Iran's biggest customer for oil, making Beijing a key target of Washington's effort to restrict Tehran's energy revenues.

The United Arab Emirates has also halted trade and financial transactions with Iran, removing an important channel for Iranian commerce. Commercial traffic through the Strait of Hormuz, a vital oil shipping route, has also fallen sharply during the conflict, according to reports.

Iran's Central Bank Governor Abdolnaser Hemmati said last week that the country's crude exports had "virtually stopped."

Diplomatic efforts

Amid the economic pressures, diplomatic efforts have focused on reviving negotiations. Pakistan's army chief Field Marshal Asim Munir arrived in Tehran on Monday with Interior Minister Mohsin Naqvi to help revive talks. US President Donald Trump spoke with Munir and urged Pakistan to use its influence to encourage Tehran to return to negotiations.

Pakistan's Army Chief concluded a one-day visit to Iran, with Iranian media saying the trip yielded valuable results.

Oman's Foreign Minister Sayyid Badr Al-Busaidi is scheduled to visit Tehran to discuss the Strait of Hormuz. Iran and Oman, meanwhile, discussed the importance of resuming navigation through the Strait of Hormuz, according to a joint statement. Iranian and Omani officials were discussing a joint temporary shipping route in the Strait of Hormuz and a mine-clearing mission, a precursor to a permanent arrangement to administer the waterway. Oman's foreign minister said in a social media post: "Future management of the Strait and a permanent solution will follow in due course."

Market reaction

The United States stopped short of imposing secondary sanctions on nations dealing with Tehran, including China, the top buyer of Iranian crude. Countries will face a specific timeline to shut down links with Iran or face unilateral punishment, US Treasury Secretary Scott Bessent said. The Treasury added new restrictions on around 60 entities, including Tehran's oil-revenue generation networks and shadow fleet vessels moving its petroleum products.

Bessent's latest measures fell short of expectations. Prices dipped further on Tuesday after the New York Times reported the US would be returning diplomats to Middle East embassies, suggesting Washington did not anticipate ramping up military action.

Brent crude fell as much as 4.3% to below $82 a barrel and WTI traded under $82 on the same day. Earlier, Brent crude futures for October delivery declined 2.52% to $86.35 a barrel, while US West Texas Intermediate futures for October dropped 2.17% to $80.56 per barrel.

The UK Navy reported on Monday that an oil tanker was struck and disabled by a projectile northeast of Ash Shishah, Oman, in the Strait of Hormuz, underscoring ongoing risks to shipping in the region.