The Iranian rial’s collapse following the February 28, 2026 US-Israeli strikes on Iran represents one of the most dramatic currency depreciations in modern economic history, with the rial losing more than half of its already severely diminished value within weeks of the conflict’s outbreak and continuing to fall as new rounds of international sanctions compounded the existing sanctions that had been in place since the withdrawal of the US from the JCPOA in 2018. Iran’s currency had already been deeply stressed entering 2026: years of sanctions, economic mismanagement, and the ongoing conflict between the government and the population over political freedoms had weakened the rial severely relative to international currencies, with the exchange rate against the US dollar having fallen from approximately 40,000 rials per dollar in 2015 to over 600,000 rials per dollar in the months before the February 28 strikes. The strikes and the subsequent closure of the Strait of Hormuz – which cut off Iran’s oil export revenues – drove the exchange rate to levels exceeding 1.5 million rials per dollar at the height of the currency crisis.

The economic protests that Iran experienced beginning in December 2025 and intensifying through January and February 2026 predated the military conflict and were driven by the cumulative pressures of sanctions, inflation, unemployment, and the population’s fury at the Islamic Republic’s economic failures and political repression. The protests, which spread from major cities including Tehran, Isfahan, Mashhad, and Tabriz to smaller cities and towns throughout the country, focused initially on economic grievances – the price of basic food commodities, the depreciation of savings in rials, youth unemployment, and the contrast between the lifestyle of the political elite and the struggling majority. They subsequently broadened to encompass political demands for accountability and an end to the Islamic Republic’s system of governance, echoing the protest cycles of 2019 and 2022 that had also been suppressed with significant loss of life. The February 28 US-Israeli strikes transformed the political context of the protests: the Iranian government successfully framed the strikes as an existential national security threat that required national unity, and the protests subsided in the immediate aftermath of the strikes as many Iranians – including some who opposed the government – responded to the rallying effect of a foreign military attack.

Sanctions Compounding the Economic Crisis

The economic context of the Iran war was not only shaped by the Hormuz closure but also by a new round of international sanctions that the United States and European Union imposed in September 2025 – before the war began – in response to Iran’s continued nuclear enrichment program. These sanctions, described by the US Treasury as “the most comprehensive sanctions package imposed on Iran since the Obama administration,” targeted Iran’s remaining financial sector access to international banking, its oil export intermediaries including the network of shadow tankers and front companies that Iran had built to circumvent previous sanctions rounds, and individuals and entities in China, India, and Turkey that had been facilitating Iranian oil sales in violation of existing sanctions. The combination of the September 2025 sanctions tightening and the February 28 conflict damage to Iranian economic infrastructure created a crisis of unprecedented severity for ordinary Iranians, with hyperinflation, food shortages in some regions, and collapse of the professional and middle classes’ savings accelerating through the first quarter of 2026. The June 14 MOU’s provision for oil sanctions relief and the release of $25 billion in frozen assets represents the first material economic relief for Iranians since the crisis began, though the pace and terms of implementation will determine how quickly that relief reaches the broader population.