Iran’s financial system is unraveling at breakneck speed as Israel continues to defend itself from the onslaught of terror the regime continues to fund.

At the heart of Iran’s economic turmoil lies its rapidly devaluing currency. Since the reimposition of US sanctions in 2018, the Iranian rial has lost a staggering 90% of its value against major foreign currencies. As of Sunday, the rial is trading at 640,000 per US dollar, down from 590,000 in August, before Israel assassinated Hezbollah leader Hassan Nasrallah.

Against this backdrop, Iran’s state-owned banks find themselves in dire straits. Seven of the country’s largest banks are now grappling with accumulated losses totaling 4.6 quadrillion rials – approximately $7.3 billion at the free market rate.

First, the government has mandated that banks provide loans to the public and companies at interest rates between 20% and 23%. While this might seem high, it pales in comparison to Iran’s average inflation rate, which has remained above 40% in recent years.

Compounding this problem is the regime’s own ballooning debt to the banking system. Between mid-2018 and mid-2024, this debt skyrocketed by 430%, reaching an eye-watering 15.6 quadrillion rials. At the free market exchange rate, this amounts to $23 billion; at the official government rate, it’s $55 billion.

The Islamic Republic’’s attempts to manage this crisis have led to a complex, multi-tiered exchange rate system. Currently, essential imports like medicine are conducted at a heavily subsidized rate of 285,000 rials per U.S. dollar. Other imports, such as food, are processed through the “NIMA” system at 468,000 rials per dollar. Meanwhile, the free market rate has soared beyond 630,000 rials per dollar, used for importing non-essential goods like household appliances and cell phones.

According to Iran International, this disparity between official and market rates has created a breeding ground for corruption. Influential insiders with access to government-provided privileges, such as export-import licenses, have profited handsomely from arbitrage opportunities.

In a desperate bid to offset these losses, Iranian banks have turned to unconventional and risky practices. Some have ventured into real estate management and property trading, activities normally prohibited for financial institutions. As such, the value of banks’ real estate holdings has now reached 2 quadrillion rials, benefiting from an 1100% increase in rial-denominated housing prices since mid-2018.

Ultimately, Iran’s dedication to terror financing and building its clandestine nuclear program is what is destabilizing the regime’s financial future.