Iran’s rial has fallen around 5 percent since early January, with a notable decline in the past three days, following US and UK strikes on Tehran’s Houthi allies.

The rial fell from 505,00 On January 2 to 530,000 against the US dollar and to 581,000 against the euro on Saturday, as uncertainty grew about a military escalation in the region.

Yemen’s Houthis have been attacking international commercial vessels in the strategically important Red Sea region since mid-November. They began firing missiles and drones and engaged in ship hijacking after Iran’s Supreme Leader Ali Khamenei called for blockading Israel in early November.

The United States and several allied countries formed a naval coalition and warned the Houthis to stop the attacks. After the Houthis dismissed the warnings, US and UK warplanes and warships launched attacks this week against dozens of military targets in Yemen.

The Iranian currency has fallen more than 12-fold since 2018 when the United States withdrew from the JCPOA nuclear deal and imposed oil export and banking sanctions on Tehran. Although illicit oil shipments to China have risen since 2021, the Iranian government still faces severe financial pressures. Annual inflation hovers around 50 percent and rial’s depreciation will push consumer prices higher.

The Biden administration has said that it does not want to engage in military escalation, but the continued Iranian proxy attacks in the region pushed Washington to respond to the Houthis.