Controlled reopening ends Iran’s lengthy stock market shutdown

Iranians shop at a street market in northern Tehran [File: Abedin Taherkenareh/EPA]

Economist Mehdi Haghbaali told Al Jazeera that authorities faced challenges to reopen the stock market, particularly as security considerations mean that companies are prevented from fully disclosing the extent of damage at their facilities and production sites.

“Brokerage firms, particularly smaller ones, are also facing significant difficulties,” Haghbaali said. “Many traders held leveraged positions through credit lines, especially options traders whose contracts expired during the market closure, leaving them without clear recourse.”

Authorities temporary barred brokers from forcing investors to either add cash and collateral or sell shares if they fall below required position thresholds.

Does this mean actual growth?

Haghbaali said the two-day reopening went better than expected but this could be more rooted in how bad the economy already was rather than a genuinely positive sign.

With steep inflation plaguing Iran in recent months, the real price of shares has been reduced. A sharp fall in the value of the Iranian rial against the US dollar has also made export-oriented companies appear more attractive as revenues often translate into higher domestic currency earnings.

But there are reasons to be cautious, Haghbaali said, with investors possibly needing discounts to invest in riskier shares.

“Trade has been severely disrupted, exporters will face difficulties maintaining operations and rising inflation will further hinder the creation of real value, which will be reflected in stock valuations,” the economist said.

The inflation rate was more than 70 percent in late April, according to the latest available official figures, and the situation has only got worse with the US imposing a naval blockade of Iran’s southern ports.

Facing a huge budget crunch, the government’s room to respond has been limited, offering families hit by sanctions only meager subsidies and e-coupons for essential goods while cracking down on hoarding and price gouging.

During previous periods of economic hardship, Iran has tried to mitigate foreign currency shortages, which can lead to inflation, by limiting the import of certain consumer goods.

To deal with the current wave of inflation, authorities could be forced to introduce such measures again, Haghbaali said, despite the need for the import of materials to help rebuild war-damaged infrastructure. Either way, there will be no easy decisions for the government, Haghbaali said.

“Naturally, a peace agreement between the US and Iran could fundamentally change the outlook, improve market expectations and provide relief to the enemy,” he added.