Iran’s rial has hit the 300,000-to-a-dollar threshold for the first time on the unregulated free market in Tehran, weakening to a new all-time low on October 1 as tensions with the US tightened and as what Iranian officials are describing as a “third wave” of the coronavirus (COVID-19) pandemic continued to take a toll on the economy.

The Iranian rial (IRR) has now lost more than 46% of its value since January. The deteriorating outlook for Iran appears to have stoked panic buying of euros and dollars on the open market. By the end of trading on October 1, bombast.com recorded the IRR at exactly 300,000 versus the USD.

The US is considering yet more sanctions that would effectively sever most if not all of the few remaining links Iran has with the global economy. A Trump administration proposal includes targeting banks still able to facilitate imports, including of humanitarian goods, people familiar with the matter told Bloomberg earlier this week.

Another matter troubling the market in Iran are warnings from Washington that the US will not tolerate attacks on its interests in Iraq by Iran-backed militias. Iraq has voiced concern that the US could close its Baghdad embassy and withdraw its troops from the country. That might pave the way for pre-US election strikes on the militias the Americans accuse of such attacks.

"We can't tolerate the threats to our people, our men and women serving abroad," David Schenker, US assistant secretary of state for near eastern affairs, told reporters at a briefing in Washington on October 1, AFP reported.

Schenker did not confirm or deny the reported US threats to withdraw its troops and close its embassy in Baghdad unless the attacks against them stop.

"We are working, and we look forward to continuing to work, with our Iraqi partners to keep our personnel and our facility safe," he said.

Pompeo’s ultimatum

US Secretary of State Mike Pompeo issued an ultimatum last week that all American diplomatic personnel would leave Iraq unless the Iraqi government puts a stop to a spate of attacks against them.

On September 28, a rocket that the US said was targeted at American troops killed seven civilians near Baghdad. The US said it was one of around 40 attacks targeting its interests in Iraq since early August.

A US withdrawal could lead to further pullouts by members of the US-led coalition fighting entrenched militants, which would be "dangerous, because the Islamic State group threatens not only Iraq but the whole region," Iraqi Foreign Minister Fuad Hussein said, according to an October 1 Radio Farda report.

"The single biggest problem in Iraq is the Iranian-backed militias that are undermining stability there, and attacking the United States," Schenker also said.