The value of Iran’s currency has risen by more than 15 percent against the US dollar, and its stock market has shattered records in the wake of the memorandum of understanding agreed between the United States and Iran on Sunday.
However, Iranians suffering for years from extremely high inflation and a plunging rial have found little economic relief as the prices of basic goods, such as food, remain high despite the diplomatic breakthrough.
The Iranian economy has suffered due to decades of US sanctions. The economic crisis was exacerbated after the US and Israel launched a war against Iran on February 28. As subsequent US naval blockade on Iranian ports further added to the misery of Iranians.
In Ferdowsi Street, the beating heart of Tehran’s foreign exchange market, the scene on Thursday was a stark departure from the panic of recent months. Exchange office boards flashed rapidly changing numbers as foreign currencies, led by the dollar, took a sharp dive.
“We closed our doors just hours before the official announcement of the US-Iran understanding at a rate of 1.8 million rials to the dollar,” Amir, a 35-year-old exchange office worker who asked to remain anonymous, told Al Jazeera. “Now it has fallen to 1.54 million rials, and we expect further declines.”
Amir noted a significant increase in sales volumes although buyers remained scarce as many anticipated the rial would strengthen further, potentially dropping to 1.4 million to the dollar or lower.
The recent gains mark a sharp turnaround. After the outbreak of the war, the exchange rate jumped to a historic peak of 1.9 million rials (190,000 tomans) to the dollar in March before settling at about 1.685 million just before recent attacks carried out despite a ceasefire.
Despite the rial’s recovery, a walk through Tehran’s grocery stores reveals a starkly different reality. For Iranians grappling with the economic fallout of crippling sanctions and the US naval blockade, the diplomatic thaw has yet to lower the cost of living.
Reza, a 42-year-old Tehran resident, told Al Jazeera that prices for daily staples like milk, cheese, cooking oil and flour remain unchanged. “They say the dollar dropped, but my shopping basket costs the same as last week,” he said. “This means the agreement hasn’t reached our pockets yet.”
From behind the cash register, 55-year-old shop owner Ramin echoed his customer’s frustration. He explained that while the government continues to distribute subsidised goods like bread, the fluctuations of the free-market dollar do not immediately impact basic food prices.
The value of the dollar on the free market varies from the official exchange rate.
Pointing to a shelf of imported goods, another shopkeeper named Karim noted that items like shampoo, toothpaste and laundry detergent are still locked at inflated prices.
“Distributors say they bought these goods two months ago at the old dollar rates,” Karim explained. “Prices will remain high until the old stock runs out and new goods enter at the lower exchange rates.” He estimated it would take at least two weeks for the market to adjust, meaning Iranians will continue to face compounding inflation in the interim.
While Main Street struggles, Tehran’s stock market is experiencing an unprecedented boom amid expectations of improved economic conditions. The trading floor has been awash in green since the initial leaks of the Washington-Tehran agreement emerged.
On Monday, the main index jumped by a record-breaking 161,000 points in a single session, marking the highest-ever influx of cash from individual investors.
By Tuesday, the market continued its staggering ascent, climbing another 112,000 points to cross the psychological barrier of 5 million, ultimately settling at a historic high of 5.1 million.
Saeed, a 40-year-old investor, called it a “historic day”. He noted that investors are rushing to buy shares in the energy and petrochemical sectors, betting heavily on the resumption of exports and the reopening of global markets.
However, Saeed remained cautiously optimistic. “The stock market is often driven by rumours,” he warned. “I don’t want to repeat the experience of the 2015 nuclear deal when the market soared and then collapsed after the US withdrawal.”
He was referring to US President Donald Trump’s 2018 withdrawal from the agreement, under which Iran agreed to restrictions on its nuclear programme in exchange for sanctions relief.
The wait-and-see approach in effect has paralysed other sectors of the economy. In central Tehran’s electronics hubs, 38-year-old shop owner Reza reported that while the prices of imported appliances have dropped in tandem with the dollar, sales have stalled because customers are holding out for steeper discounts.
A similar freeze has gripped the housing market. Nasrin, a 36-year-old real estate agent in northern Tehran, observed that a recent price surge that accompanied the initial truce has now given way to stagnation. Many property owners are clinging to inflated prices, seemingly unaware that the market dynamics have shifted, bringing property transactions to a virtual standstill.
For macroeconomic experts, the mixed market signals are entirely expected. Hossein Selahvarzi, the former head of the Iran Chamber of Commerce, Industries, Mines and Agriculture, cautioned that the new agreement is “not a magic wand” capable of instantly fixing years of structural issues in the economy.
While the war severely damaged Iran’s infrastructure, Selahvarzi emphasised that the roots of the country’s economic malaise were firmly planted well before the bombing began.
“War is the enemy of investment, production, trade and public welfare,” Selahvarzi told Al Jazeera. He warned against the analytical mistake of believing that a peace memorandum alone would revive the economy.
“Ending the military confrontation does not necessarily mean the beginning of economic prosperity,” he said, stressing that restoring stability to the business environment remains the country’s most urgent priority.
“What we have before us is a limited and fragile opportunity to correct course and rebuild the economy, and this opportunity could be lost quickly if not managed correctly.”
