Iranian Rial Loses a Quarter of Its Value as Inflation Hits 90% Amid Mounting Blockade Pressure
Key Facts
The Iranian rial has lost about a quarter of its value since the operation began in August, with its unofficial rate reaching a record 2.687 million rials per dollar in October, according to a U.S. Treasury Department report cited by Axios. The report said annual inflation reached 90% in September, up from about 35% in early 2025. These figures put the currency’s decline and accelerating prices at the center of the economic pressures examined in the Treasury assessment. The report attributed the pressure to the blockade and sanctions, as well as what it described as falling revenues and disrupted trade. In a broader context, the International Monetary Fund estimated in its July update that Iran’s real GDP would contract by 5.4% in 2026, with consumer prices rising 68.9% over the year. These annual estimates differ from the September inflation reading, but they paint a picture of economic slowdown and sharply rising prices.
Signs of economic decline had appeared before the October figures. In its forecasts published in April, the World Bank said the Iranian currency had fallen 44% year on year in early March, linking the drop to shrinking exports and limited access to foreign-exchange reserves as sanctions tightened and conflict intensified. The bank estimated GDP would contract by about 2.7% in fiscal year 2025/26, ending March 20, 2026, citing trade disruptions in March and rising tensions around the Strait of Hormuz. It also reported that annual inflation reached 62.2% in February and food inflation hit 99%, attributing this to inflation expectations and an increase in the subsidized exchange rate. The 90% inflation reading in September came after those figures, while the World Bank and IMF numbers reflect estimates for different periods and measures. Regionally, the World Bank forecast in October that output in the Middle East, North Africa, Afghanistan and Pakistan would contract by 2.1% in 2026, after growing 3.3% in 2025, as the continuing closure of the Strait of Hormuz weighed on the region’s economies and markets.
In the oil sector, the Treasury report said Iran had not loaded oil onto tankers since August 25, attributing this to the blockade and sanctions. Citing data from Kpler, it added that Tehran had sold the rest of its oil stranded at sea. The Treasury Department said in its statement that oil revenues were falling to zero as the U.S. naval blockade took hold, and that the government had become more reliant on remaining industries to maintain the appearance of economic solvency. The assessment places industry and transport at the heart of Tehran’s efforts to keep economic activity going after oil loading stopped, according to the report. On October 1, the Treasury announced it was targeting Iran’s automotive, rail, manufacturing and steel networks under Operation Economic Outcast, announced by Treasury Secretary Scott Bessent on August 24, 2026. The department said Iran Khodro and Saipa account for more than 90% of the domestic car market and together produce about 1.5 million cars annually.
The Treasury linked its targeting of transport networks to Iran’s efforts to keep its economy and trade moving in the face of the naval blockade. It said Tehran had turned to railways to help sustain economic activity, including the transport of oil and regional trade. But diverting trade to land routes led to bottlenecks at Iran’s borders with Pakistan, Turkey, Afghanistan and Turkmenistan, according to the Treasury report cited by Axios. The report said thousands of trucks were stranded at the Turkish border, facing delays of up to 20 days, while hundreds of trucks waited at the Pakistani border. In air transport, the report said the United Arab Emirates, Oman, Iraq and Georgia and Azerbaijan barred Iranian airlines and canceled flights to Iran. It added that Turkey had suspended all Mahan Air flights, in restrictions on air routes that coincided with bottlenecks in road transport.
In a diplomatic track separate from the Treasury report, delegations from Saudi Arabia, Pakistan and Turkey met Iranian officials in Tehran on October 26. The Associated Press reported that participants agreed to continue talks on regional cooperation, without the four countries setting a date or location for a future meeting. Iranian President Masoud Pezeshkian said his country supported any agreement that deepened regional cooperation, helped resolve disputes and enabled countries in the Islamic world to benefit from shared resources and capabilities. Iran’s ambassador to Pakistan said Tehran remained open to talks with Washington under an interim agreement brokered by Pakistan in June. He added that Iran had told Pakistan it was ready to reopen the Strait of Hormuz if the United States lifted its naval blockade, tying the resumption of traffic through the strait to the progress of negotiations.