Across the Middle East, governments facing sanctions and conflict are trying to steady markets while containing political fallout at home. In Iran, that pressure is now playing out in public as conservative and hardline factions clash with senior officials over whether the country is nearing economic collapse. The dispute centers on Tehran, where the government is trying to calm currency markets even as its own political camp highlights worsening trade and inflation data.
Central bank moves to calm markets as infighting sharpens
Iran’s Central Bank stepped in publicly on September 1, when Governor Abdolnaser Hemmati said the country still had sufficient foreign currency reserves despite escalating U.S. sanctions, according to Reuters. Hemmati also said the bank was prepared to inject up to $2 billion into the foreign exchange market, a figure reported by Reuters from comments carried by the semi-official Tasnim news agency. The intervention followed renewed pressure from Washington and a period of sharp volatility in Iran’s currency market.
That statement amounted to a direct rebuttal to the collapse narrative that has been gaining traction both abroad and among some of Iran’s own hardline political voices. Reuters reported that Hemmati’s comments were aimed at reassuring markets after several Iranian officials, including President Masoud Pezeshkian, had already acknowledged worsening economic conditions. The central bank’s message was that hardship is real, but a total breakdown is not.
The split is notable because the criticism is coming from inside the broader conservative establishment rather than only from reformist or opposition circles. In recent weeks, hardline figures and state-aligned commentators have pressed the government over deteriorating living conditions and policy management, even as other officials insist the system retains enough reserves and internal tools to stabilize trade and imports. What remains unconfirmed is the exact size of Iran’s usable reserves, which officials have not disclosed publicly.
The immediate effects of the dispute are most visible in Tehran, where exchange markets, import financing and government messaging are concentrated. Reuters reported that Iran’s currency crossed the threshold of 2 million rials to the U.S. dollar in August, underscoring the pressure on households and businesses in the capital as prices for imported goods and staples remain under strain. Tehran is also where the central bank’s market intervention, if carried out at the full announced scale, would be felt first.
President Masoud Pezeshkian said Iranian exports and imports had slumped by nearly 35% because of U.S. sanctions and a naval blockade, according to Reuters reporting published on August 29. Reuters also reported that annual inflation reached 66% last month, adding to evidence that the squeeze extends beyond financial markets and into everyday purchasing power. Those figures help explain why internal criticism has become more visible even among political factions that broadly support the state.
What is not yet known is how evenly the damage is being distributed across Iran’s provinces, industries and income groups. Officials have not released a comprehensive public breakdown showing which regions are absorbing the largest losses in trade, employment or consumer purchasing power. For now, the clearest verified signals remain national indicators and Tehran-based policy responses.
The broader cause of the dispute is the speed at which Iran’s wartime and sanctions-related economic strain has deepened. Reuters reported on August 29 that Iranian leaders were acknowledging the toll of war with the United States, with the country’s supreme leader urging the government to address worsening hardship. The same Reuters report said the sanctions drive had compounded existing pressure on an economy already dealing with high inflation and shrinking trade.
Additional reporting from the Associated Press said Iran’s economy had been hit by years of sanctions and more recent war-related disruption that sharply reduced oil revenue. AP also reported that Tehran was scrambling to sustain trade as the United States threatened penalties on countries that continue commercial dealings with Iran. That broader external pressure helps explain why officials are trying to project control even while internal factions argue over who is responsible for the damage.
For residents, the practical meaning is straightforward: the government is signaling continued intervention to defend the currency and maintain essential imports, but it is also acknowledging harder living conditions. Hemmati said the central bank could move foreign currency into the market if needed, while senior officials have separately recognized that trade has fallen sharply and inflation remains elevated, according to Reuters. The next measurable test will be whether those market-stabilization efforts slow the rial’s slide and ease price pressure in the weeks ahead.