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Iran weighs a US reply on Hormuz as the rial loses 12% of its value in 27 days
Iran says it has an official US reply to its proposal to end the war, and the rial has passed 2.5 million to the dollar, a record low. Tehran's price for reopening the Strait of Hormuz is cash, and a currency falling this fast makes each week of talks more expensive for Tehran.
The Investor · Invest desk
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What happened
- Foreign Minister Abbas Araghchi offered to reopen the Strait of Hormuz within a week if the US lifted its port blockade, released frozen Iranian assets and waived sanctions on Iranian oil sales.
- Trump rejected that proposal days earlier, saying Iran wanted a deal because it was "losing so badly" but that the offer "would not be acceptable."
- Iranian and US officials held indirect talks at the UN General Assembly, and mediators kept working on a deal after Trump's rebuff, according to anonymous officials.
- On Tuesday the Treasury sanctioned ten individuals and entities in Iran, Hong Kong and Pakistan accused of procuring weapons for Iran's defense ministry, under "Operation Economic Outcast."
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Why it matters
- cost Iranians holding rials pay for every week of talks, while the dollars Tehran wants Washington to release are now worth about 14% more at home than at the Sept. 2 record.
- exposure The nationwide protests that began Dec. 28 grew out of anger over a collapsing currency, so each new rial record raises the domestic stakes of holding out for the full terms.
- contradiction Trump says the war will be "over with very, very soon" but also expects it to run past the Nov. 3 midterms, so his statements do not tell Tehran how long Washington intends to wait.
Everything Iran is asking the US for is either money or a way to earn it. Tehran wants its frozen assets, which are a stock of cash; a waiver on sanctions against its oil sales, which is a flow of cash; and an end to the US blockade of its ports, the route that flow would take. In exchange it offers to reopen the Strait of Hormuz within a week, with other conditions attached [6].
For anyone pricing a cargo through the strait, those conditions decide when it could reopen [6]. The report does not include oil prices or shipping rates, so it cannot show how much of a reopened strait is already in the price of a barrel.
The currency sets how much waiting costs Tehran. Tuesday's low fell on Sept. 29, 27 days after the previous record [2]. A dollar now costs about 14% more rials than it did then. Put another way, anyone paid in rials has lost at least 12% of their money's dollar value in under four weeks [4][1]. If the rial kept falling at that rate in a straight line to Nov. 3, 35 days after Tuesday's low, a dollar would cost about 2.9 million rials [2][3].
Washington spent the same week adding pressure. The administration says it is pushing forward with economic warfare against Tehran [15]. Treasury announced its ten new designations on Tuesday, a day before Iranian officials said they had the reply [9][1]. That same Tuesday, Trump said Iran is "failing very badly, very badly" [12].
Iranian officials did not say what the reply contained or whether it was a rejection [2]. It could be Trump's public rejection put in writing [7]. A second possibility is that it splits the terms, ending the port blockade in exchange for the strait while holding back the assets and the oil waiver. The third is a holding reply that keeps the mediators working [8] until the US political calendar moves.
I think the third fits the evidence best. The sanctions campaign kept adding names [9], and the only date Trump has attached to the war's end falls after the Nov. 3 midterms [13]. The case against comes from Tehran, where the president talks as if the reply left room. Araghchi presented the reply to President Masoud Pezeshkian at a Cabinet meeting, government spokesperson Fatemeh Mohajerani told the state-run IRNA agency [3]. "We will make every effort to bring the agreement to fruition and will firmly stand up for the rights of the Iranian people," Pezeshkian said [4]. He also said: "The agreement must now be based on a win-win strategy." [5]
A pause in Treasury designations would prove this wrong. So would any US step on the blockade of Iranian ports, because either would mean the reply offered more than Trump's public rejection [7].
What to watch
- Further Treasury designations under Operation Economic Outcast while the US reply is under discussion in Tehran, or a pause in them.
- Any disclosure by Iran or the mediators of what the US reply says about the blockade of Iranian ports.
- The rial against a straight-line path of about 2.9 million per dollar by Nov. 3; running ahead of it would raise Tehran's cost of waiting.