Iran Weighs Fuel Price Hike as Rial Hits All-Time Low
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- President Masoud Pezeshkian acknowledged the government's struggles in a Sunday speech, alluding to the six-month US-Israel war on Iran, while First Vice President Mohammad-Reza Aref suggested the cheapest 60-liter fuel quota stay in place but other tiers be gradually liberalized.
- The Iranian rial plunged to an all-time low of 2 million per US dollar on Sunday after Trump threatened Iran with "the most crushing economic operation" ever undertaken against any country.
- The IMF projects Iran's GDP will contract 5.4% in 2026; the Statistical Center of Iran reported in July that food inflation has surged past 128% and overall prices are 88% higher than a year earlier.
- Energy officials, led by government head of energy optimisation Esmail Saghab-Esfahani, are weighing three options: first-come-first-served pump shutdowns, universal 30-liter monthly quotas for all Iranians, or full price liberalization at roughly 872,000 rials (about 44 cents) per litre.
- A pilot price hike in Kerman province targeting 204 pump stations was cancelled overnight into August 13, with the central government publicly contradicting local officials and saying it had not been consulted.
- Iran's fuel supply is running a daily deficit — consumption of about 135 million litres exceeds production of roughly 121 million litres — prompting two quota cuts since March (the second tier cut from 100 to 50 litres) and a halt to fuel imports due to the war.
- The 2019 fuel price hike sparked nationwide demonstrations, and similar measures preceded the January 2026 protests, a precedent that has officials publicly treading carefully despite signalling that a "considerable price increase" is coming.
Why it matters: Iran's government faces a fiscal trap with the rial at 2 million per dollar and food inflation above 128%: fuel subsidies are unsustainable when the state pays 65 cents to produce each litre but sells the cheapest tier for under 1 cent. Liberalizing prices to the proposed 872,000 rials per litre would cascade through transport and logistics costs, deepening the squeeze on workers like the clothing-shop employee earning $150 a month who already says rising prices are "crushing" ordinary Iranians.
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