Iran's currency falls to one million per dollar after Trump threat

A day after US President Donald Trump warned Iran of retaliation if its Houthi allies in Yemen launched an attack, the rial sank to a historic low against major currencies.

The currency was trading at one million per US dollar in Tehran on Tuesday as gold prices also rose. This represents a 14,000-fold devaluation of the rial, which had remained stable at 70 per dollar for over a decade before the 1979 Islamic Revolution.

Food inflation, which has averaged 100% in recent months, is expected to reach critical levels in the coming months unless Tehran initiates negotiations with the Trump administration.

The rial, which was valued at around 40,000 per dollar in early 2018, began to plummet after Trump withdrew from the JCPOA nuclear deal in May of that year and imposed tough economic sanctions, pushing inflation above 40%.

Despite long negotiations with the Biden administration in 2021-2022, Tehran did not reach an agreement with the US over reviving the JCPOA and its economic situation continued to deteriorate.

In February, President Trump called for new negotiations, stressing that Iran must not acquire nuclear weapons and vowing to tighten sanctions. So far, Supreme Leader Ali Khamenei has rejected talks, while Iranian officials maintain that Tehran will not negotiate under pressure.

Three days ago, Trump ordered air strikes against the Yemeni Houthis who have attacked international shipping in the Red Sea region and lobbed missiles at Israel. This was seen as a clear warning to Tehran. On Monday, Trump warned Tehran that it will be punished if its allies the Houthis retaliate against a US air assault over the weekend, escalating his rhetoric against Tehran.

"Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN, and IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!" Trump wrote on his Truth Social platform.

As tens of millions of Iranians earn the equivalent of less than $150 a month and inflation is rising, some media outlets and commentators in Tehran have warned of potential unrest.