Iran's currency plunged to historic lows following the collapse of Bashar al-Assad's regime in Syria, with the Iranian rial dropping over 20% in recent weeks amid escalating regional tensions. The US dollar surged past IRR740,000 in Tehran's parallel market on December 12, while the euro exceeded IRR770,000, highlighting the mounting pressure on Iran's economy.

Currency traders express growing concern about further depreciation, with some warning the dollar could reach IRR1,000,000 if regional instability persists.

President Pezeshkian's administration faces a complex balancing act as it attempts to unify Iran's multiple exchange rate system. This system has been rapidly emptying the state coffers to keep prices artificially low.

The government maintains five different dollar exchange rates – free market, NIMA, SENA, trading and banking rates – a system officials acknowledge has created significant economic distortions.

"Sanctions remain the primary cause of currency price increases, directly impacting commodity prices and inflation rates," economic analyst Morteza Delkhosh told ISNA news agency. "Recent regional developments and the Syrian conflict have intensified market pressures, though these are secondary to fundamental structural issues."

The NIMA rate, used for imports, has risen from IRR400,000 at the start of the year to IRR530,000, while free market rates have reached approximately IRR700,000. This widening gap has prompted concerns about speculative pressure in parallel markets, particularly affecting gold trading.

With base inflation already at 40%, local analysts warn that if restrictions are lifted, current currency suppression policies could trigger even steeper declines.

Iran’s finance minister, Abdolnasser Hemmati, has already argued that suppressing the exchange rate has created a budget deficit of nearly IRR1,000 trillion.

According to one government estimate, the country’s finance minister has acknowledged that the multiple exchange rate system has generated substantial economic rent, estimated at IRR1,700 trillion units.

"Until we address fundamental issues like sanctions and FATF compliance, which are prerequisites for a normal economy, implementing domestic economic reforms will remain challenging," Delkhosh added, stressing the importance of regulatory compliance and banking sector reforms.

He proposed that alleviating international tensions is essential for enhancing the nation's economy and curbing inflation.

Fortunately, the president’s approach has been correct, fostering domestic consensus and neighbourly relations to prevent conflicts.

This relative calm has already benefited the stock market, which has grown in recent weeks. As a barometer of economic health, the stock market indicates a brighter economic outlook.