Shopkeepers and merchants were among the first to react, taking to the streets of the capital Tehran in late December to vent their frustration at a government they accuse of mismanaging the economy. The unrest spread into a broader protest movement involving students, workers and other groups calling not just for an improvement in living standards but an end to the Islamic republic system led by Supreme Leader Ayatollah Ali Khamenei.
The crisis comes at a delicate moment for the country’s leaders, whose prestige suffered a severe blow from an Israeli and US bombing campaign in June that destroyed much of the country’s nuclear infrastructure and killed dozens of military officials and scientists. Government officials appear to be at odds over how to deal with the unrest.
What sparked the protests?
Iran buys many essential goods from abroad, including wheat, cooking oil and pharmaceutical ingredients. The rial’s slump has made those imports costlier for merchants, who raised their prices in response, making a range of basic items prohibitively expensive. Five years of drought have hit local food production, leaving the country even more dependent on expensive imports.
Inflation was expected to average around 42% in 2025, accelerating from 33% in 2024, according to the International Monetary Fund. Many Iranians were already struggling to feed themselves before the latest price surge, with local media reporting in 2022 that half of them were consuming less than the standard 2,100 daily calories.
There’s also widespread anger over chronic pollution, gas and electricity shortages, and mismanagement of the country’s natural resources. The government adjusted its mechanism of fuel subsidies in December, increasing pump prices for gasoline and heaping additional costs on households and businesses.
Why has the currency been weakening?
The rial has been under pressure for years due to Western sanctions and systemic corruption that’s undermined confidence in the economy. The rial slumped by around 45% against the US dollar in 2025, according to Bonbast.com, as Iranians converted savings into foreign currencies, gold or property.
Iran’s economy has also been hit by falling oil prices. Brent crude fell by 18% in 2025 to around $60 a barrel — far below the $165 needed for Iran’s government to break even on its budget, according to a May estimate from the IMF.
The currency turmoil has been exacerbated by a system of tiered exchange rates, under which the government subsidizes imports of some goods for certain entities. The system has fueled corruption, causing resentment among Iranians.
Why have Iranians been getting poorer?
While Iran sits on huge oil reserves, the crude is off-limits to most foreign buyers due to the sanctions imposed by the US and its allies. The penalties were first imposed in response to the seizure of the US embassy after the country’s Islamic revolution in 1979, and were gradually expanded in the following decades. Reinforced in the 2000s in an effort to stop Tehran developing nuclear weapons, the sanctions have left Iran bereft of inward investment and modern technology as foreign companies and well-known brands pulled out.
National industries have withered due to corruption and mismanagement. Much of the country’s infrastructure has aged and deteriorated. Iranian agriculture is held back by inefficient farming and chronic water shortages. Many consumer goods are produced by state-owned or semi-state entities, including large charitable foundations tied to powerful institutions that control swathes of industry and retailing with limited transparency.
Iran’s oil exports are still the mainstay of its economy. Most of the oil is shipped via opaque trading networks to Chinese refiners, who buy it at a significant discount because of the sanctions.
What’s been happening with the sanctions on Iran?
Sanctions imposed under the aegis of the United Nations were eased as part of a 2015 nuclear deal with the US and other nations. But Iran benefited little and President Donald Trump quit the deal in 2018, reimposing a raft of US sanctions.
Iran held talks with the US last April over its nuclear program that could have led to some sanctions relief. But these failed to yield an agreement. The Israeli and US airstrikes in June destroyed much of Iran’s nuclear activity and curtailed the ability of the UN nuclear watchdog to verify the size and location of Iran’s highly enriched uranium. As a result, comprehensive UN sanctions were reimposed in September.
How are these protests different to those in the past?
Economic hardship has fueled previous bouts of unrest, but the trigger was often social or political, such as the downing of a Ukrainian passenger plane in 2020 and the 2022 death in police custody of a young woman, Mahsa Amini, who had been arrested for allegedly failing to wear a hijab. This time around, the demonstrations were sparked by rampant inflation and worsening living standards.
Many Iranians have found ways to circumvent government restrictions on social media, and citizens have been venting their frustration with the ruling elite online in recent months. It’s a marked change from the past when people were afraid to even post a photo of a woman with her hair uncovered.
Responding to the protests, Supreme Leader Khamenei said “rioters must be put in their place.” Security forces rounded up people denounced as riot instigators in official media. Rights activists said the death toll from the unrest climbed to 36 after clashes in Tehran’s main market and a hospital in the western city of Ilam.
However, state channels aired coverage of the marches — albeit heavily censored — suggesting the government may be relaxing some controls on the media. President Masoud Pezeshkian, a political moderate, described protesters’ demands as legitimate and urged security forces not to target peaceful demonstrators.
The crackdown came with a rare recognition from officials that all is not well in the country. While figures in the security establishment accused foreign actors of inciting the unrest, Khamenei and Pezeshkian acknowledged that failures of governance alongside sanctions have worsened Iran’s predicament.
Where does Iran go from here?
In five decades of theocratic rule, Iranians have endured military conflicts and sweeping restrictions on social freedoms. Unemployment and poverty have caused millions to emigrate, and many Iranians have become convinced the leadership is incapable of improving their lives.
In response to the protests, the government said it will end the foreign-exchange subsidies as they encouraged corruption, and announced plans for higher subsidies to make essential goods more affordable.
If the measures fail to quell the demonstrations, the regime will be facing the twin threats of a restive population and hostile foreign powers.
The June attacks by Israel and the US that struck Iran’s nuclear and defense facilities exposed how vulnerable the country is to aerial attack. Trump has threatened military action against Iran if it chooses to kill “peaceful protesters.” However, it’s unclear how this would aid the demonstrators. And, for now, there is no unified, organized opposition movement that looks capable of seriously challenge the leadership.