Tehran’s Stock Exchange (TSE) made gains in early December after a period of uncertainty amid protests and further sanctions. On 5 December, the benchmark index gained 240 points to close at 24,356. This past week has seen a rebound following a panic-selling week, which saw the main index fall about 4 per cent as some companies were oversold.

On 21 November, George Osborne, the UK’s Chancellor of the Exchequer terminated all contracts between Britain and Iran’s banking system. This was followed by an EU agreement on 1 December to impose 180 new sanctions on Iranian individuals and companies.

“The sanctions were not as bad as the market was expecting. The key thing was oil, the market expected the EU to put an embargo on Iranian oil, which would have been quite disastrous, but that did not happen, even though the sanctions were quite heavy-handed this time,” Ali Mashayekhi, head of investment research at Iran-based brokerage firm Turquoise Partners.

Since the beginning of September, the main index has lost about 8 per cent.

“In the first half of the Iranian year, which is from March to September, the market experienced sharp growth. The market was overheated a bit and quite a lot of stocks were over-valued, so we were expecting some degree of correction. Toward the end of August, we saw some price corrections and the market cooled down,” says Mashayekhi.

Fluctuations in global commodity prices also adversely affected the TSE, which is heavily commodity based and investors are increasingly becoming cautious.

The sanctions and the protests at the British embassy in Tehran have caused further tensions that are beginning to worry investors. There is also a sense of turbulence in the domestic political arena with friction between the different political groups. These tensions are likely to continue until the parliamentary elections set for February 2012.

The TSE’s market capitalisation at the moment is about IR130bn. About 2 per cent of the TSE’s total capital comes from abroad.

“This number is not going to grow at all because things are becoming more difficult,” says Mashayekhi.