Iran International
Iran’s stock market is breaking records even as the dollar and gold hit new highs, an apparent contradiction that may point to the same dynamic: households and investors scrambling to protect their wealth as the rial weakens and the economic toll of the Iran-US war grows.
Before trading closed on Wednesday, the final working day of the week in Iran, the Tehran Stock Exchange reached a record 7,766,000 points.
The market has risen 109 percent since the start of the Iranian year, while small investors poured roughly 4.7 trillion tomans, or about $19 million, into shares in a single day.
Iran’s prominent economic daily Donya-ye Eghtesad argues that the surge is not necessarily a sign of confidence. People are buying shares as political and economic risks rise, it says, while savers are also moving into gold, coins and dollars, all of which hit record highs on the same day.
The open-market dollar has passed 250,000 tomans, while measured in dollars, the stock market remains well below previous peaks.
At least part of the rally therefore appears to reflect a search for protection against the falling rial rather than confidence in the underlying economy.
Similar pressures are visible in consumer markets, where prices for cheaper mobile phones rose 33 to 42 percent in a month, outpacing the currency’s decline as import quotas, registration rules and fees hit lower-priced devices particularly hard.
Earlier this week, the government announced that the central bank would sell up to $2 billion in cash. The first $1 billion tranche is being sold through banks, with adults holding a national ID card allowed to buy up to $10,000.
The government’s own newspaper, Iran, warned that selling cash may slow the dollar’s rise but cannot reverse the underlying trend while inflation, budget pressures and political uncertainty remain unresolved.
Tehran’s prosecutor also ordered action against “market disruptors,” including online channels publishing exchange rates. Eyewitnesses on Ferdowsi Avenue, the capital’s main currency-trading hub, reported shorter queues and more sellers than buyers on September 30.
The respite was brief. On October 1, the open-market dollar rose 1.49 percent to 2,593,000 rials, its highest level in a year.
The central bank has been steadily raising the official exchange rate, from about 137,000 to more than 174,000 tomans this year, to encourage exporters to repatriate their foreign-currency earnings. Even so, the open-market rate remains much higher.
Because official imports are priced at the exchange-center rate, increases can feed through into the cost of imported goods. They also reduce the real value of the government’s electronic food-voucher scheme unless the state spends more rials to maintain it.
Hardline outlets including Kayhan and the IRGC-linked Javan portray the rial’s fall as part of Washington’s economic war. But their criticism is also directed at Iranian policymakers.
Kayhan calls currency sales a repeatedly failed policy and a waste of resources in wartime. It wants the government to reverse its economic liberalization and use judicial and security pressure to force exporters to repatriate their foreign-currency earnings.
The criticism exposes an argument within the establishment over how Tehran should respond: spend scarce foreign currency trying to contain demand, or preserve it while tightening controls over exporters and the domestic market.
That argument is becoming more urgent as the US blockade curtails Iranian oil exports, depriving Tehran of a major source of foreign currency.
Diplomacy could provide some relief, with Iran seeking access to frozen assets and an easing of sanctions and the blockade as part of negotiations with Washington.
For now, however, the clearest signal comes from the markets themselves. Stocks, gold and the dollar are all setting records. The simultaneous rush into them suggests that for many Iranians, almost anything that might preserve its value increasingly looks preferable to holding rials.
The Amir Kabir industrial area in Isfahan is home to mechanics, machinists, body shops, battery specialists and parts dealers serving trucks, construction equipment and mining machinery. Labor news agency ILNA said activity across the district had fallen sharply as transport demand weakened and the cost of keeping vehicles on the road climbed.
“When freight activity slows and less cargo is being moved, drivers face serious problems,” a person working in the district told ILNA. “Most drivers bought their vehicles on installment, so besides making loan payments, they also have to cover the high cost of supporting their families.”
Inflation eats into household budgets
The slowdown comes as Iranian households face some of the steepest price increases in years. Official data for September showed consumer prices were 89.8% higher than a year earlier, while average inflation over the preceding 12 months reached 73.6%. Food and drink prices had already risen 127.5% year on year in August.
Reuters reported in September that food prices had more than doubled while the wider economy was being squeezed by sanctions, restrictions on oil exports and the costs of the seven-month conflict with the United States.
Iran’s currency has added another layer of pressure. The rial fell beyond 2.5 million to the US dollar on the free market earlier this week, a record low, compared with roughly 1.1 million a year earlier.
For businesses dependent on imported equipment, that fall feeds quickly into prices.
“Parts dealers buy according to the day’s dollar rate,” an Amir Kabir business operator said, adding that prices often fail to come back down even when the rial temporarily strengthens.
“The consumer and the worker end up carrying the greatest burden,” he said.
Fewer loads hit an entire chain of jobs
The industrial district illustrates how weakness in one part of Iran’s economy spreads quickly into others.
A single truck can generate work for engine mechanics, gearbox specialists, machinists, painters, welders, upholsterers and parts sellers before it gets back on the road. When freight volumes fall, drivers delay repairs and workshops lose business.
“There’s a deep slowdown across the industrial area,” the tradesperson said. “It’s not that the vehicles don’t need work. Purchasing power and liquidity have fallen sharply.”
Some vehicles are repaired but then sit idle because there is no cargo to move, he said. Even when transport work is available, delayed payments from cargo owners leave drivers and workshops short of cash.
That weakness is also reflected in accounts shared with Iran International, with Iranians describing cuts to spending on food, housing and medicine as savings run down and private-sector job losses spread.
Cheap parts bring expensive problems
Workshop owners are also grappling with replacement parts that they say are either prohibitively expensive or of poorer quality.
A local tradesperson told ILNA that original components for older European and American heavy vehicles had become difficult to obtain, leaving operators increasingly dependent on Chinese-made replacements.
“In the past, if you rebuilt a Volvo or Mack with original parts, it could run for years without another major repair,” he said. “Now poor-quality parts mean repeated breakdowns.”
Original parts can still sometimes be found, he added, but at prices that often make them uneconomical for truck owners already dealing with loans, insurance and weaker freight income.
The result is a cycle in which operators choose cheaper parts, suffer more frequent failures and return to workshops while having less money available to pay for the repairs.
Skilled jobs come under pressure
The downturn is beginning to affect hiring and job security.
A machining workshop may employ 10 to 12 people repairing engine blocks, crankshafts and other heavy components. With business down and insurance, municipal charges and other expenses still rising, workshop owners may stop taking on workers or begin cutting staff, according to ILNA.
“A workshop with 10 or 12 workers may no longer want to expand its workforce and may even reduce the number of employees because its income cannot cover its costs,” a local business owner said.
The impact could outlast the immediate downturn. Training an experienced technician can take about a decade, he said, but workshops have less incentive to bring in apprentices when they are unsure whether they can retain existing staff.
Pressure reaches beyond Isfahan
The problems in Amir Kabir mirror a broader contraction in everyday economic activity as the government struggles with reduced oil revenues, sanctions and restrictions on trade.
US pressure has sharply reduced Iran’s access to foreign currency from oil exports, while sanctions evasion has become more costly. That has made imported equipment and raw materials harder to finance just as the rial’s fall raises their local-currency price.
For the workers and drivers in Isfahan, however, the crisis comes down to a simpler calculation: there is less work, while virtually everything needed to do that work costs more.
“If prices are going to remain high, then at the very least the volume of work has to increase,” a local tradesperson told ILNA. “Businesses need enough cash flow to keep operating.”