Iranian Rial Hits Record Low Amid US Naval Blockade and Sanctions

Tehran, Iran – Iran's national currency has dropped to a new record low as the government tries to mitigate the effects of a US-enforced naval blockade.

The Iranian rial surpassed 1.81 million against the US dollar on the open market early Wednesday afternoon before recovering partially. Earlier this week, the rate fluctuated around 1.54 million, compared to 811,000 rials to the dollar a year ago.

The rial had been relatively stable for the past two months after a previous drop when US forces massed ahead of the US-Israel war on Iran, which began in late February.

The latest decline follows unchecked inflation, which has been affecting Iran's economy due to poor management and sanctions, and continues to devastate households. Washington now has three aircraft carriers in the region and is deploying more troops and equipment as Israel signals readiness to resume fighting, three weeks after a ceasefire began.

This week, Iran's authorities projected a hardened stance on negotiations with Washington and vowed to counter the naval blockade of Iran's southern waters. US Central Command confirmed on Tuesday that the blockade has "cut off trade into and out of" the country.

Amid threats from US President Donald Trump, Iran's government has also tried to empower border provinces to import essential goods by easing bureaucratic procedures. It has allocated $1 billion from the national wealth fund to purchase food and implemented a partial policy reversal to resume providing subsidized preferential exchange rates to lower prices, despite concerns over corruption.

Non-Oil Trade Takes a Hit

According to customs data published by state media, Iran's non-oil trade has been negatively impacted after trade relations were disrupted or severed by the war, and critical infrastructure was bombed.

Iran's customs office reported total non-oil trade value for the Iranian calendar year ending March 20 at nearly $110 billion, with $58 billion allocated to imports. This is about 16% lower than the previous year.

Non-oil trade volume was valued at about $9 billion in the 11th month of the calendar year ending February 19 and $6.46 billion in the final month, indicating a decline of about 29% related to the war that began on February 28. The final month was also about 50% lower than the estimated over $13 billion reported in the same period last year.

Part of the decline is linked to significantly disrupted shipping through the Strait of Hormuz as Iran and the US vie for control of the strategic waterway. The US and Israel have also targeted attacks with thousands of munitions on ports, naval facilities, airports, and railway networks across the country.

Iran's top steel and petrochemical producers have also been heavily bombed, along with oil and gas facilities, power plants, and major industrial zones. The US and Israel have threatened to take Iran "back to the stone age" through systematic bombing of civilian infrastructure such as power plants.

To manage the impact and maintain domestic supply, Iran's authorities have imposed temporary restrictions on exports of steel, petrochemicals, polymers, and other chemicals.

Oil Exports in the Crosshairs

The US is using military power and economic tightening measures to push for a reduction in Iran's oil exports, a goal it has pursued in recent years through sanctions.

Since mid-April, US troops have deployed personnel to control or inspect vessels passing through waterways near Iran, in addition to targeting the so-called shadow fleet of tankers Iran uses to evade sanctions and transport its oil.

Warships and thousands of troops could still launch a land invasion or devastating aerial attacks on Kharg and other key Iranian islands. The Trump administration is expected to increase pressure on Iran's oil sector as access to export routes and very large crude carriers holding oil at sea is hindered.

The US Treasury has blacklisted refineries in China—the biggest buyers of Iranian crude—and has been cracking down on banking channels and cryptocurrencies allegedly facilitating Tehran's oil trade and linked to the Islamic Revolutionary Guard Corps (IRGC)—which Washington designates as "terrorist."

"We will track the money Tehran is desperately trying to move abroad and target every source of financing linked to the regime," US Treasury Secretary Scott Bessent said on social media.

Chinese refineries buy about 90% of Iran's oil exports and imported a record 1.8 million barrels per day in March, according to Vortexa Analytics data cited by Reuters, which also noted sales are expected to slow due to deteriorating refining and domestic processing margins.

According to data released by China's General Administration of Customs, the value of China's bilateral trade with Iran in the first quarter of 2026 reached $1.55 billion, down 50% from the same period last year.

In March, the first month of the war, trade reached $184 million, nearly 80% lower than the previous year and 64% lower than the previous month. Both China's imports from Iran and exports to Iran fell significantly due to the war.

The removal of the United Arab Emirates (UAE) as Iran's main trading partner and import market also significantly affected the country's economy, increasing its reliance on land neighbors such as Turkey, Iraq to the west, and Pakistan to the east.

The UAE, a key part of the Trump-led Abraham Accords that saw several countries normalize relations with Israel, has been heavily targeted by Iran with ballistic missiles and drones.

The UAE has closed many Iranian entities on its territory in the past two months, including financial intermediaries, asked Iranian citizens to leave, and said it will take years for bilateral relations to return to previous levels.