Iran’s Stock Market in Crisis Following the 12-Day Conflict
By Mansoureh Galestan | June 30, 2025
Conflict and Crisis: A Market Shaken by War
The Tehran Stock Exchange (TSE) has entered one of its most volatile eras in the aftermath of the 12-day conflict between Iran and Israel, a confrontation that marked the first direct military exchange between the two nations in the region. The fighting, rooted in deep-seated geopolitical tensions, caused an immediate surge in economic and political risk, triggering a severe shock wave through Iran’s already strained capital markets.
Such external shocks tend to exacerbate underlying economic vulnerabilities, including chronic inflation, international sanctions, and persistent currency devaluation—factors that had already weakened Iran’s investment climate prior to the hostilities. The war’s economic aftershocks rippled far beyond the battlefield, immediately hitting the heart of Iran’s financial system: its stock market.
Trading Suspension: Shield or Signal?
As military operations escalated, authorities in Tehran took the rare and dramatic step of suspending trading on the TSE for nine consecutive business days—an emergency measure under Article 23 of the Securities Market Law. Officials insisted the maneuver was intended to protect ordinary investors from panic selling and to stabilize the system amid national uncertainty.
During this period, only fixed-income investment funds were allowed partial liquidity, enabling some investors a lifeline for basic financial needs. While seen by some analysts as a prudent approach to mitigate immediate systemic risk, this closure also signaled just how grave the authorities judged the crisis. Meanwhile, international investors and seasoned analysts viewed the move as a red flag, heightening fear over the regime’s capacity to manage financial shocks.
Reopening Exposes Deep Market Fault Lines
When trading finally resumed after a temporary ceasefire, the TSE opened to a cascade of sell orders, revealing the extent of investor anxiety. On the first post-war trading day, more than 99% of listed stocks traded in negative territory. The TSE’s benchmark index plunged by 62,503 points (down 2.1%) to close at 2,922,101, while the equal-weighted index lost 15,522 points, finishing at 908,163.
Markets witnessed a record-breaking 35 trillion toman (over $700 million USD equivalent at market rates) queued up for sale—an unmistakable sign of mass capital flight. Trading volume on retail shares was anemic, as wider market confidence evaporated. Over 750 stocks were locked in sell queues, with buyer interest nearly nonexistent.
Analysts likened the sell-off not to a brief crisis but to the sudden collapse seen in markets during times of political upheaval or war, such as Venezuela in 2018 or Russia during the 2022 Ukraine invasion. The comparison underscored the exceptional fragility of Iran’s capital markets.
No Safety Net: Policy Inaction Fuels Panic
Market participants and economic observers responded with outrage at what they described as a failure of leadership among Iranian financial authorities. Unlike previous crisis periods, the government did not implement tighter “price bands” to contain daily losses—daily fluctuation limits remained at the standard 5%, opening the door to steep price drops. Nor was there any major liquidity injection from the central bank or largest institutional investors, despite expectations for decisive action to support the market.
The Market Stabilization Fund, the government’s main tool for crisis intervention, launched limited buying programs but these proved insufficient against the scale of panic selling. Reports from market insiders indicate that authorities hesitated, concerned that large-scale buying would quickly deplete available stabilization resources and further undermine currency stability.
Critics argue that better crisis management—combining prompt liquidity support, tighter trading restrictions, and transparent policy communication—could have softened the blow. As it was, government inaction only entrenched investor pessimism.
Mounting Losses: Where Did the Money Go?
Numbers released at the end of the first week post-conflict illustrated the carnage:
- Total trading turnover hit 13.57 trillion toman, but only around 28% involved retail stocks; most activity remained in less volatile fixed-income instruments.
- Over 2.4 trillion toman in direct investor capital left the market—adding to long-running capital outflows as Iranians seek safer assets abroad or in real estate and hard currencies.
- Banking and insurance stocks, long mainstays of the TSE, saw sharp declines, intensifying the drag on the broader index. Heavyweights such as Iran Khodro and Saipa were suspended from trading in an ultimately unsuccessful bid to halt index hemorrhaging.
- The overall market capitalization fell below the critical three-million-point psychological threshold.
Combined with significant outflows from fixed-income funds and the near-complete absence of buy-side interest, the TSE found itself adrift, with no clear floor in sight.
Psyches and Structures: Scarred by Uncertainty
Beyond the numbers, the crisis dealt a major psychological blow to Iranian investors. Confidence—a crucial, intangible asset for any financial market—was crushed not only by geopolitical turbulence but by the regime’s lack of clear, coordinated response. Many retail investors, already disenchanted by the TSE’s 2020-2022 bear market and ongoing corruption scandals, now felt abandoned by authorities they had hoped would shield the system from shock.
This loss of trust is especially dangerous for emerging markets like Iran, where domestic investors have limited alternatives and face ongoing barriers to international diversification. Sustained low liquidity, wide bid-ask spreads, and erratic policy signals create a self-reinforcing cycle of exits and further devaluation.
On the structural side, the crisis exposed deep market weaknesses: thin participation, overreliance on state-affiliated conglomerates, chronic lack of transparency, and regulatory capture. International sanctions, freezing access to global capital and technology, leave reforms out of reach and shut out hope for genuine recovery.
Economic and Political Crossroads Ahead
The TSE collapse compounds broader economic pressures on Iran. Inflation remains stubbornly above 40%, the official unemployment rate is rising, and the national currency—the rial—continues its long slide, trading at historic lows against the dollar. The International Monetary Fund in late 2024 projected Iranian GDP growth at a meager 1.7% for 2025, far below the rate needed to reverse two years of recession.
Further political repercussions are looming. In the last year, large-scale protests across Iran have directly targeted economic mismanagement alongside calls for greater political freedoms. The regime’s failure to protect small investors has stoked resentment, increasing the risk of further unrest. Several investor associations have publicly demanded the resignation of financial regulators and greater parliamentary oversight over crisis response mechanisms.
Meanwhile, capital market instability damages Iran’s prospects for international business, investment, and eventual sanctions relief. For neighboring Gulf states and Middle East capital markets, Iran’s turmoil serves as a cautionary tale about the vulnerabilities of economies exposed to both external shocks and internal governance shortfalls.
The Path Forward: Can Confidence Be Restored?
Experts and institutional investors outline an urgent reform checklist:
- Reinforce and expand the Market Stabilization Fund: Substantial resources and clear mandates must back regulators’ intervention tools.
- Tighten price fluctuation bands: Limiting daily losses can buy time for policy responses and reduce panic-driven sales.
- Inject meaningful liquidity: Coordinated support from the central bank, government, and private financial firms is crucial to stabilize prices and volume.
- Communicate proactively and transparently: A credible dialogue with investors, including acknowledgment of risks and concrete action steps, can mend damaged trust.
- Targeted trading halts for volatile stocks: Suspending select stocks can reduce index contagion and prevent deeper cascades during ongoing uncertainty.
Yet, as long as underlying political and structural issues persist, only limited recovery is possible. Absent profound reform, Iranian capital markets look set for continued turbulence.
