Iran's rial plunges past 2 million per dollar as basic costs soar

Iran's currency has fallen to a historic low, with the US dollar trading above 2 million Iranian rials on the free market, as the country grapples with the combined impact of long-running sanctions, war-related disruption and accelerating inflation.

According to a report by Al Jazeera, the rial's latest collapse has sharply reduced the purchasing power of Iranian households, with the prices of food, medicines and other necessities rising dramatically since the US-Israel war on Iran began on 28 February.

The Iranian economy has been under pressure for decades because of US and international sanctions, particularly those linked to Tehran's nuclear programme. The latest conflict has compounded those difficulties for the country of around 92 million people.

What 2 million rials can buy

Before the war, 2 million rials were enough to purchase roughly 4kg of tomatoes, half a kilogram of chicken and just under a litre of cooking oil.

The same amount now buys approximately half those quantities. Average tomato prices have risen by 71%, while chicken has become 74% more expensive and cooking oil has surged by 177%.

Medicine prices have also climbed sharply. Insulin, which is essential for people with diabetes, has risen by 642%. Paracetamol prices are up 93%, while baby formula — much of which is subsidised by the government — has become 95% more expensive.

The figures, based on average prices tracked in Tehran, remain volatile as the rial continues to fluctuate.

Families cut back as costs mount

The worsening economic situation is forcing households to reconsider both what they buy and how much they consume.

Afsaneh*, a 35-year-old mother of a one-year-old who lives with her husband in Tehran, told Al Jazeera that her family's weekly grocery expenses have increased by 20 to 30%.

"Before the war, we could think about what we wanted to do three or six months down the road, but now our only concern is making it to the end of the month with the income we have," Afsaneh told Al Jazeera.

"My husband and I both work, and we have a one-year-old child. The daily cost of childcare at daycare centres has now reached around 500,000 tomans [5 million rials or $2.5], which is difficult for us to afford."

Iranians commonly use the term toman as an unofficial monetary unit equivalent to 10 rials, making large currency amounts easier to express.

Government subsidies on baby formula have provided some relief for families such as Afsaneh's. But monthly wellness check-ups and nutritional supplements for their child are not covered by insurance, making quality healthcare increasingly difficult to afford.

As the family focuses on food and other necessities, spending on non-essential items has been pushed aside.

"Many purchases, such as new clothes or upgrading our car, have been cut from our plans. And I don't think things are going to get better anytime soon," she said.

Businesses squeezed by falling demand

The economic strain is also being felt by businesses.

War damage has disrupted domestic production, while a US naval blockade of Iranian ports has made imports and exports more difficult. The weaker rial has further increased the cost of goods, while wages have failed to keep pace with inflation.

Iran's government-approved minimum wage for the current Iranian calendar year, which ends in March 2027, stands at 166 million rials ($82). Including government assistance and benefits, the amount remains below 220 million rials ($108).

Zamir*, a 35-year-old Tehran resident who works in men's retail fashion, told Al Jazeera that sales have fallen by 40% compared with last year.

"I can say that it is completely predictable that many of the people working in this market will go bankrupt before the end of winter and will have no choice but to shut down their businesses," he says.

"Everything has become more expensive," Zamir explains. "Workers' wages, the cost of raw materials, and just about anything else you can think of have gone up."

Many retailers, he said, are now selling summer stock below cost, while another round of price increases is expected to reach shops in autumn.

"From the moment you leave your house until you get back home, you spend at least 2 million tomans [$10] on things like coffee, cigarettes, water, and transport. Even if you are extremely careful with your spending, you still have to spend at least 700,000 to 800,000 tomans [$3.5-4] a day, and that doesn't include regular groceries and household necessities," Zamir said.

Salaries lose value before payday

For salaried workers and low-income families, rapidly rising prices mean that even a monthly income can lose much of its purchasing power before the next pay cheque arrives.

Salama*, 28, a mother of one who works as a fisher in Hormozgan province in southern Iran, said the rising cost of groceries has forced her family to make significant cuts.

"We used to do our weekly grocery shopping for around 500,000 tomans [$2.5], but now we have to spend at least 5 million tomans [$25] for the same groceries, and we've had to cut back on things like meat and chicken or eliminate them altogether."

Rather than increasing, her income has declined, she said, forcing her to reduce spending wherever possible.

"Even a simple cold medicine for children or seasonal allergy medication, including Iranian brands, now costs around 300,000 tomans [$1.5], and even a simple visit to a general practitioner costs no less than 1 million tomans [$5]," she said.

War deepens an existing crisis

Iran's economic troubles long predate the latest conflict. Years of sanctions, inflation, unemployment and weak purchasing power had already placed considerable pressure on households.

The war has added further damage to infrastructure and production, disrupted trade and complicated imports, making it even harder for families and businesses to cope with rising costs.

For ordinary Iranians, the unprecedented exchange rate is therefore more than a currency-market statistic. It is reflected in a shrinking shopping basket, rising medical bills and increasingly difficult choices about how to make a monthly income last.

*Names have been changed to protect identities.