Iran rial hits record low as US launches 'Operation Economic Outcast' sanctions

Iran's rial plunged to a record low Monday, dropping to 2.02 million per US dollar as currency markets opened, hours before Washington unveiled a fresh sanctions campaign and threatened secondary penalties against countries that continue doing business with Tehran.

The official central bank rate stood at around 1.5 million rials per dollar, but the market rate is what most Iranians pay.

Treasury Secretary Scott Bessent announced the new measures, dubbing the campaign "Operation Economic Outcast." The announcement provided little detail and did not name which countries could face secondary sanctions, according to the Associated Press. China, Turkey and the United Arab Emirates are Iran's largest trading partners, the AP reported.

"We are level-setting with every country to tell them our expectations. We know who they are. They know who they are," Bessent said, according to the AP. "So when the hammer of U.S. Treasury actions falls upon them, they will have no one to blame but themselves."

Asked why Washington was not immediately imposing secondary sanctions on Iran's trading partners, Bessent said he wanted to give countries a chance to shift away from Iran before it was too late. "Why would I want to blow up the global financial system?" he said.

Trump's pledge last week to unleash an "economic D-Day" against Tehran gave way to a more calibrated approach — new warnings rather than immediate designations of trading partners, according to the AP. Bessent said Trump has been "making phone calls to world leaders with specific requests to cease their interactions" with Iran.

The currency's slide predates the conflict. The rial was already under pressure before the US and Israel attacked Iran on Feb. 28, with the economy facing double-digit inflation and negative growth. Nearly six months of war have deepened the damage: Iranians find daily staples increasingly unaffordable, with rice up some 60% and beef more than 150% since the war began. The International Monetary Fund forecasts gross domestic product will contract more than 5%.

So far, economic pressure has not translated into political pressure. Iran retains a strategic lever in the Strait of Hormuz, where its attacks and threats on shipping have brought traffic in the vital waterway to a near halt — damaging the world economy and heaping pressure on President Donald Trump ahead of congressional elections. The war has devolved into a fight over control of the strait, through which a fifth of the world's traded oil transited before the conflict. Iran is refusing to fully reopen it unless it can charge ships.

Iran and Oman, located on the opposite side of the strait, are reportedly in the final stages of agreeing on a plan for joint management of the waterway, and Oman's foreign minister is set to visit Tehran on Tuesday.

Trump, ahead of the sanctions announcement, posted on social media: "IRAN IS COMPLETELY COLLAPSING!!!"

"President Trump decimated Iran's economy to a point where the rial has never been weaker and inflation has rarely been higher," Bessent wrote Sunday in an opinion piece in the Financial Times. "The regime's final refuge now lies in the self-deception of fearful nations that still believe accommodating aggression can secure a durable peace."

The UAE last week announced it was suspending all trade with Iran — long one of Iran's largest trading partners and its biggest source of imports. Bessent called the decision "not a coincidence," according to the AP, which reported the UAE move followed a reported missile attack on the Gulf country.

Iran pushed back. Foreign Ministry spokesperson Esmail Baghaei told reporters in Tehran on Monday that "any escalation of this situation will undoubtedly bring about consequences." "Our hands are not tied," he added.

Parliamentary Speaker Mohammad Bagher Qalibaf, Iran's lead negotiator over the past six months, said the US is not in an economic position to further restrict Tehran's relations. "Iran's trading partners, both in the media and through messages sent to us, have made it clear that they don't take these statements into account anywhere," Qalibaf posted on X, according to the AP.

The Treasury's action Monday targeted nearly 60 Iran-linked entities, accusing them of roles in Iran's nuclear and missile programs, cyber activities and oil shipments, the AP reported. The designations include Hong Kong-based Sweet Ocean Industrial Limited, accused of helping Iran acquire sensitive goods such as laser optics equipment, and China-based Shenzhen Huamei, a service provider for the Iran-based logistics company BRE Line, along with BRE Line's Hong Kong branch.

Bessent signaled China is in Washington's sights despite a fragile trade truce between the world's two largest economies. "No one is above the reach of U.S. sanctions," he said, according to the AP. "If they facilitate transactions and are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted."

Experts expect careful calibration, with Chinese leader Xi Jinping expected to visit the US in about a month. "It depends on the aggressiveness with which President Trump is willing to enforce it," Ali Wyne, senior research and advocacy adviser for US-China relations at the International Crisis Group, told the AP. "Thus far, despite threatening severe economic consequences for countries that do business with Iran, he has largely given China a pass."

The administration is struggling to find an off-ramp nearly six months into an unpopular war with an increasingly obstinate Iran, according to the AP. Diminishing stockpiles of key weapons appear to have pushed US officials toward economic warfare, the AP reported, and Defense Secretary Pete Hegseth said later Monday he was not ruling out resuming strikes against Iran during a lull in hostilities.

Diplomacy continues in parallel. Pakistan, which played a key role in brokering a 60-day ceasefire in June, sent a high-level delegation to Tehran on Monday to discuss ending the war. Daily Sabah reported that Trump recently spoke with Pakistani Field Marshal Asim Munir ahead of the army chief's visit to Iran, citing a person familiar with the discussion; Reuters first reported the call, according to Daily Sabah.

In downtown Tehran, the mood was bleak. Sadegh Mahmoudi, 73, joined a line of about a dozen people buying US dollars with his remaining savings to hedge against further declines. "There is no hope for a deal and peace," he said.