WANA (Jul 04) – Three weeks after the unprecedented military clash between Iran and Israel, Iran’s currency market has gone through a turbulent period—offering a revealing snapshot of both the fragility and resilience of the country’s economy in times of crisis.

 

In mid-June 2025, direct military tensions between Iran and Israel—limited to missile and air strikes—sparked fears that the conflict could escalate into a full-scale war in the Middle East. These concerns swiftly spilled over into Iran’s currency market, pushing the U.S. dollar’s value in Tehran’s open market to nearly 97,000 tomans—its highest recorded rate at the time.

A view of closed shops in the Tehran Bazaar following the Israeli strikes on Iran, in the centre of Tehran, Iran, June 16, 2025. Majid Asgaripour/WANA (West Asia News Agency)

However, contrary to some predictions, this sharp surge was short-lived. Within less than two days, the dollar retreated to below 92,000 tomans, following intervention by Iran’s central bank and a relative easing of geopolitical anxieties. Just days after a ceasefire was announced, the dollar fell further to around 82,600 tomans—even lower than it had been prior to the outbreak of hostilities. Yet the rate climbed back up to 88,000 tomans shortly after, indicating a volatile but gradually cooling trend.

 

According to economic analysts, this cycle of spikes, corrections, and an unstable recovery was driven by several key factors:

 

1. Intervention by the Central Bank of Iran

The central bank stepped in forcefully to stabilize the market—injecting foreign currency, restricting withdrawals, and increasing the supply of cash in the official market. These measures curbed the dollar’s runaway climb.

 

2. Limited Scope and Duration of the Conflict

Despite the intensity of the strikes, the confrontation did not evolve into a large-scale ground war and was halted within days through a ceasefire. This helped temper negative expectations.

 

3. Continued Oil Exports and Foreign Trade

Contrary to some early concerns, Iran’s oil exports and imports were not significantly disrupted. Iranian tankers continued passing through the Strait of Hormuz, reassuring the market that the country’s foreign currency income remained stable.

Fire of Israeli attack on Sharan Oil depot is seen following the Israeli strikes on Iran, in Tehran, Iran, June 15, 2025. Majid Asgaripour/WANA (West Asia News Agency)

Why Does the Dollar Rate Matter So Much?

To understand the significance of these fluctuations, one must consider that in Iran’s economy, the exchange rate serves as a critical barometer. The U.S. dollar is not only vital for foreign trade but also seen by ordinary citizens as a hedge against inflation. A spike in the exchange rate often triggers price hikes for imported goods and fuels inflationary pressure, directly affecting household living costs.

 

Recommendations from Iranian Economists

Despite the relative success in containing the initial surge, Iran’s economy remains vulnerable to political and security shocks. Experts argue that structural reforms are needed to build a more resilient currency market. Key proposals include:

 

  • Enhancing transparency in the release of foreign exchange and oil revenue data to reduce rumors and speculative behavior.

 

  • Providing insurance mechanisms for private sector foreign currency income to ensure repatriation of export revenues.

 

  • Developing currency derivatives markets to hedge against exchange rate volatility.

 

  • Diversifying the currency basket and strengthening trade ties with non-Western partners such as China, India, and Russia.

 

  • Issuing domestic foreign-currency bonds to absorb liquidity and reinforce the central bank’s reserves.

 

  • Increasing gold reserves as a monetary backstop and a partial substitute for the U.S. dollar.
A man sits in an exchange office in Tehran, Iran, February 21, 2023. Majid Asgaripour/WANA (West Asia News Agency)

A man sits in an exchange office in Tehran, Iran, February 21, 2023. Majid Asgaripour/WANA (West Asia News Agency)

Sadegh Mohabi, an Iranian economist, believes that the recent crisis proved the Iranian currency market, while highly sensitive, has developed a kind of “learned resilience.” In his words, “Iranian financial markets have realized that not every political crisis inevitably leads to economic collapse.”

 

Mohabi emphasizes that the central bank’s swift response, combined with a more measured reaction from the public, played a major role in containing the crisis. Still, he warns that fresh sanctions or an escalation of hostilities could again send the currency soaring. In his view, the key lies in transforming Iran’s currency market from an emotional battleground into a structured system with proper risk management tools—one where citizens and traders are protected from extreme volatility.

 

The recent military standoff between Iran and Israel placed Iran’s currency market in a precarious position. Yet, it ultimately avoided a full-blown monetary collapse. The episode demonstrated that active government intervention, limited conflict geography, and continued oil exports can help tame market panic. Still, the market remains structurally vulnerable—overreliant on oil, lacking in financial tools, and exposed to geopolitical shocks. Achieving long-term stability will require deep financial and trade reforms.