War, Currency and Power: Dollar, Shekel and Rial By CA Anil K Jain ( Mail: caindia@hotmail.com ) The unfolding geopolitical conflict involving the United States, Israel and Iran has not only reshaped strategic alignments in the Middle East but has also produced a sharp and revealing impact on global currency markets. In times of war, currencies often act as silent indicators of deeper economic strength, institutional credibility and international confidence. A comparative analysis of the US Dollar (USD), the Israeli Shekel (ILS) and the Iranian Rial (IRR)-offers a compelling narrative of resilience, stability and collapse. Before the Conflict: A Clear Hierarchy of Strength Prior to the outbreak of the current conflict in early 2026, the global currency system already displayed a well-defined hierarchy. The US Dollar, the world’s dominant reserve currency, was trading at approximately Rs. 91-Rs. 92 per dollar. Its strength was underpinned by the size of the American economy, deep financial markets and its central role in global trade-particularly in commodities like oil. The dollar was not merely a currency but the backbone of the international financial system. The Israeli Shekel, though far smaller in global influence, stood as a strong and stable emerging-market currency. It traded at roughly Rs. 28.5 to Rs. 29.7 per shekel, reflecting Israel’s advanced technology-driven economy, strong fiscal management and integration with global capital markets. In stark contrast, the Iranian Rial had already undergone decades of structural weakening due to sanctions, inflation and isolation. Before the conflict, one million rials were worth approximately Rs. 60 to Rs. 65, meaning a single rial had a negligible value of about Rs. 0.00007. The currency was effectively confined to domestic use and informal markets, with little or no international acceptance. Thus, even before the first shots of conflict, the stage was set: a dominant dollar, a stable shekel and a deeply fragile rial. One Month into the Conflict: Divergence Intensifies After one month of escalating tensions and military engagement, currency movements have reinforced this hierarchy-albeit with sharper contrasts. The US Dollar has strengthened modestly, rising to around Rs. 93-Rs. 94 per dollar. This appreciation reflects a classic “flight to safety” phenomenon. In times of uncertainty, global investors move capital into dollar-denominated assets, reinforcing its status as the ultimate safe-haven currency. Rising oil prices and global risk aversion have further supported the dollar’s upward movement. The Israeli Shekel, remarkably, has remained stable, trading in the range of Rs. 29.3 to Rs. 29.8. While geopolitical risks typically weaken currencies, Israel’s strong institutional framework, credible central banking and continued capital inflows have prevented any major depreciation. The shekel’s stability underscores the resilience of a well-integrated and diversified economy even under wartime conditions. The most dramatic shift, however, has occurred in the Iranian Rial. Within just one month of conflict, the currency has depreciated significantly. The value of one million rials has fallen to approximately Rs. 52-Rs. 55, marking a 15-20 percent decline in a very short period. In practical terms, where Rs. 100 previously equated to about 1.5 million rials, it now corresponds to nearly 1.8 million rials. This rapid erosion reflects a collapse in confidence, increased demand for foreign currency and heightened economic uncertainty. The Iranian Rial in the International Market: A Currency Without a Country Unlike the dollar or even the shekel, the Iranian rial has virtually no presence in the international financial system. It is not freely convertible, is absent from major forex trading platforms and is largely confined to domestic and black-market transactions. Measured in Indian rupee terms, the distortion becomes even more apparent: Rs. 1 today equals roughly 14,000 to 15,000 rials. Yet this numerical magnitude masks a deeper truth-the rial’spurchasing power is extremely low, and its utility outside Iran is almost nonexistent. The war has intensified this marginalisation. As uncertainty rises, both domestic and international actors increasingly abandon the rial in favour of stronger currencies such as the dollar. This process of “dollarisation” further weakens the local currency, creating a vicious cycle of depreciation and inflation. Iran’s Economy Under Stress: Between Survival and Strain The currency collapse is only one symptom of a broader economic crisis facing Iran. Even before the conflict, Iran’s economy was constrained by long-standing international sanctions, heavy dependence on oil exports and high inflation-estimated at 40–50 percent annually. The war has amplified these vulnerabilities. Oil exports, the backbone of Iran’s foreign exchange earnings, face disruptions due to geopolitical tensions. Import costs-particularly for essential goods such as food and medicine-have risen sharply as the rial weakens against global currencies. In Indian rupee terms, goods that previously cost Rs. 10,000 equivalent now require significantly more rials, fueling domestic inflation and eroding purchasing power. At the same time, capital flight has intensified. Households and businesses are increasingly converting their savings into dollars, gold or other hard assets, further draining confidence in the national currency. How Long Can Iran Sustain the War? The key question is not whether Iran can withstand the immediate shock of conflict, but how long it can sustain the economic pressure. In the short term (0-3 months), Iran can manage. Oil revenues-still largely denominated in US dollars-provide a lifeline, while the state-controlled nature of the economy allows for administrative control over prices and resources. However, the medium term (3-12 months) presents serious challenges. If the conflict persists, the rial may depreciate further, potentially falling below Rs. 50 per million rials. Inflation could accelerate, imports may become scarce and fiscal pressures will intensify. In the long term (beyond one year), sustainability becomes highly uncertain. Prolonged war, combined with sanctions and currency collapse, raises the risk of hyperinflation, economic contraction and social instability. Without de-escalation or external economic relief, the Iranian economy may struggle to maintain equilibrium. Iran’s New High-Denomination Currency: A Symptom of Deep Economic Strain Iran has recently introduced high-denomination currency notes, including a 10 million rial note, reflecting severe economic stress rather than strength. Despite the large face value, the note has very low real purchasing power due to prolonged high inflation and currency depreciation. Persistent inflation, often exceeding 35-40%, has eroded the value of money, making everyday transactions increasingly cumbersome and necessitating larger notes. Economic sanctions, geopolitical tensions, and limited access to global financial systems have further weakened the economy and the rial. Additionally, rising reliance on cash amid uncertainty has increased demand for higher denominations. Iran is also considering redenomination by removing four zeros to simplify transactions. However, such measures address symptoms, not causes; long-term stability will require structural reforms, inflation control, and restored economic confidence. A Three-Tier Currency Reality The ongoing conflict has effectively created a three-tier global currency reality when viewed in Indian rupee terms: • The US Dollar (Rs. 93-Rs. 94) has strengthened, reaffirming its global dominance. • The Israeli Shekel (Rs. 29-Rs. 30) has remained stable, reflecting economic resilience. • The Iranian Rial (Rs. 0.00007) has weakened sharply, highlighting systemic fragility. Conclusion: Currency as a Mirror of Power Currencies do more than facilitate trade-they reflect the underlying strength of nations. The past month of conflict has made this reality unmistakably clear. The United States, with its global financial dominance, has seen its currency strengthen. Israel, backed by strong institutions and economic credibility, has maintained stability despite conflict. Iran, already economically constrained, has witnessed further deterioration, with its currency losing value rapidly in both domestic and international terms. In the end, the battlefield is not only geographic-it is also financial. And in that arena, currencies are proving to be among the most telling indicators of who is enduring the war, and who is being weakened by it. ---------------------------------------------------- Author of this article, C.A. Anil K. Jain( caindia@hotmail.com ) is a highly acclaimed Chartered Accountant with over four decades of professional experience. He is widely recognized for his expertise in financial and asset planning, taxation, international investments, and business growth strategies. Beyond advisory work. He actively contributes to national economic discourse through policy representations to the Government of India, frequent appearances on television and radio, and extensive writing. He is also the author of the acclaimed books Bharat: The Development Dilemma and River Water Recharge Wells, reflecting his commitment to India’s economic development and sustainable water solutions.