Iran's economy is in freefall 10-million rial bill

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The conflict in the Middle East is plunging an already fragile Iranian economy into freefall.
The International Monetary Fund estimates that the Iranian economy will shrink by 6.1% in 2026.
The regime in Tehran is not blind to the turmoil its economy is in, with senior officials warning that it may take more than a decade to rebuild the war-shattered economy.

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Tehran's primary war tactic has been economic damage. Iranian strikes have targeted the energy infrastructure of its neighbors and instituted a blockade on the vital Strait of Hormuz, through which was shipped before the war, precipitating the worst energy shock in decades.

But its own economic position is precarious.

Before the conflict, Iran was already under pressure due to sanctions. Inflation exceeded 50% in 2025. Its currency, the rial, had lost 60% of its value in the months after the 12-day war against the U.S. last July.

Food inflation soared to 64% by October last year and had accelerated to 105% by February, with bread and cereals up 140%, and oils and fats up 219% in the year through March 2026.

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Iranian banks started distributing a 10-million rial bill last month, the largest denomination note in its history, as authorities sought to contain inflation and meet demands for hard cash.

In its World Economic Outlook, the International Monetary Fund estimated that the Iranian economy will shrink by 6.1% in 2026, with 68.9% inflation. Its currency has fallen to around 1.32 million rial per U.S. dollar.

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The effective closure of the Strait of Hormuz and the U.S.' subsequent blockade have cut off most of Iran's international trade, including oil exports.

More than 90% of its annual trade passes through the strait. Renewed strains amid the U.S. blockade could cut off 70% of Iran's export revenues, Jason Tuvey, deputy chief emerging markets economist at Oxford Economics, wrote in an April 15 note.

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