Capital flight in Iran over the past fortnight reached its highest recorded level since the 1979 Islamic revolution, prompting financial advisors to the hard-line government of President Mahmoud Ahmadinejad to call for a temporary suspension of the Tehran Stock Exchange (TSE), according to market investors.

The market flight took a dramatic turn for the worse after Ahmadinejad made a speech in Tehran calling for the destruction of Israel and threatening Iran’s Muslim neighbours that developed ties with the Jewish state, an investor close to the government, who wished to remain anonymous, said.

The hard-line president’s remarks were condemned by the international community, and Tehran received a reprimand by the United Nations Security Council.

The capital flight began in earnest in June, after the election of Mahmoud Ahmadinejad as the new president. Ahmadinejad’s record as a radical Islamist and a former Revolutionary Guards commander, and his reputed remark that “stock exchange speculation is forbidden in Islam” sent jitters through the country’s markets. Nervous investors have been transferring their capital to safe havens such as Dubai in the United Arab Emirates. In the past four months, the Tehran Stock Exchange has lost more than 20 percent of its value.

Because it controls the oil revenue, which comes in U.S. dollars, the Islamic state has a vested interest in a weak national currency. (It could get more rials for the same amount of dollars in the domestic market.) Mr. Ahmadinejad has tried to exploit that opportunity by printing an unprecedented quantity of rials. Economists in Tehran speak of "the torrent of worthless rials" that Mr. Ahmadinejad has used to finance his extravagant promises of poverty eradication. The result has been massive flights of capital, mostly into banks in Dubai, Malaysia and Austria. Ayatollah Mahmoud Shahroudi, the Islamic Chief Justice, claims that as much as $300 billion may have left the country since President Ahmadinejad was sworn in.