The best summary statistic for Iran’s economy is its currency - the Rial - and this has gone into freefall since July 14.
On an annualized basis, the Rial is down 110 percent versus the Dollar since July 14, which is way above its normal pace of depreciation in recent years.
Its economy is imploding - the Rial in freefall is an indication of this - and control over the Strait of Hormuz is slipping away.
The chart above shows daily data for the exchange rate of the Iranian Rial versus the Dollar starting in 2022.
On an annualized basis, the Rial is down 110 percent since July 14.
Thank you for subscribing to my posts. If you’re not yet a paying supporter, please consider becoming one. That’ll allow you to DM me with questions and comments. Your contribution will help cover the cost of the data I use in my posts, which I fund out of my own pocket. Thanks so much for your support and feedback!
I pushed for a naval blockade back in March on the rationale that Iran - much like Russia - is a gas station masquerading as a country. Oil exports and the revenue they generate power the rest of the economy, so these places implode if you disrupt their one-trick-pony business model. We’re getting a live test of this theory now. The US reimposed its blockade on July 14 and has made this iteration more onerous than the first one, including by doing things I recommended ahead of its reinstatement.
The best summary statistic for Iran’s economy is its currency - the Rial - and this has gone into freefall since July 14. On an annualized basis, the Rial is down 110 percent versus the Dollar since July 14, which is way above its normal pace of depreciation in recent years. In my opinion, the popular narrative on Iran is wrong. The US has time on its side. Iran doesn’t. Its economy is imploding - the Rial in freefall is an indication of this - and control over the Strait of Hormuz is slipping away. The US is on the right path. It just has to be patient and let things play out.
The chart above shows daily data for the exchange rate of the Iranian Rial versus the Dollar starting in 2022. The two vertical red lines denote the initial imposition of the blockade on April 13, 2026, and its reimposition on July 14, 2026. Every imposition of the blockade is followed by a sharp depreciation of the Rial versus the Dollar, which is a sign Iran’s export revenues are collapsing and preventing it from importing the stuff it needs for its economy to function. It’s hard to get a sense of the scale of this, so the chart below compares the annual fall in the Rial in recent years with its annualized fall since the reimposition of the blockade. On an annualized basis, the Rial is down 110 percent since July 14. That’s a full-blown currency crisis and it’s impossible to run a functioning economy - let alone fight a war - when you’re in such a crisis. Iran is running out of time.
