Iran Protests Flare Amid Economic Collapse & Regional Setbacks

Nationwide protests sparked by a failing economy are placing renewed pressure on Iran's theocracy, which has responded by shutting down internet and telephone access across the country.

The unrest comes as Tehran reels from multiple crises. A 12-day war with Israel in June saw the United States bomb nuclear sites within Iran. Meanwhile, economic pressure has intensified since the United Nations reimposed sanctions in September over the country's atomic program. This has sent the Iranian rial into a free fall, with the currency now trading at over 1.4 million to the U.S. dollar.

At the same time, Iran's "Axis of Resistance"—its network of allied countries and militant groups—has been severely weakened since the start of the 2023 Israel-Hamas war.

Gauging the Scale of Iran's Nationwide Unrest

Understanding the full scope of the protests has been challenging. Iranian state media has offered minimal information, while online videos provide only brief glimpses of demonstrations amid the sound of gunfire. An internet shutdown has further complicated reporting, and journalists in Iran already face significant restrictions.

Despite this, reports indicate the movement is widespread and persistent.

• Geographic Reach: The U.S.-based Human Rights Activists News Agency (HRANA) reported on Sunday that more than 570 protests have occurred across all 31 of Iran's provinces.

• Casualties and Arrests: The group, which relies on a network of activists inside Iran, stated the death toll had reached at least 116, with over 2,600 arrests.

The demonstrations appear to be continuing, even after Supreme Leader Ayatollah Ali Khamenei declared that "rioters must be put in their place." U.S. President Donald Trump has warned Tehran that if it "violently kills peaceful protesters," the U.S. "will come to their rescue," a threat that carries new weight after American troops captured Venezuela's Nicolás Maduro, a longtime Iranian ally.

Figure 1: Protests have erupted across Iran as citizens voice their anger over the country's severe economic and political crises.

Economic Meltdown: The Core Driver of Public Anger

The collapse of the rial is at the heart of Iran's widening economic crisis. The nation is grappling with an annual inflation rate of approximately 40%, driving up the prices of staples like meat and rice.

Recent government policies have added to the population's financial strain:

• Fuel Prices: In December, Iran introduced a new pricing tier for its subsidized gasoline, increasing the cost of some of the world's cheapest fuel. The government plans to review these prices every three months, signaling potential future hikes.

• Subsidized Exchange Rate: Iran's Central Bank recently ended a preferential, subsidized dollar-rial exchange rate for all products except medicine and wheat, a move expected to cause a spike in food prices.

The protests began in late December among merchants in Tehran before spreading nationwide. While initially focused on the economy, the demonstrations quickly evolved, with protesters chanting anti-government slogans. Public anger has been building for years, notably after the 2022 death of 22-year-old Mahsa Amini in police custody, which triggered its own wave of massive demonstrations. Some protesters have chanted in support of Iran's exiled Crown Prince Reza Pahlavi, who has encouraged the demonstrations.

Figure 2: A shopkeeper stocks shelves in Tehran as skyrocketing inflation and the collapse of the rial have made basic goods increasingly unaffordable.

Geopolitical Setbacks Weaken Iran's Regional Influence

Iran's "Axis of Resistance," a network that grew in prominence after the 2003 U.S.-led invasion of Iraq, is now reeling from a series of major defeats.

• Hamas: The group has been crushed by Israel in a devastating war in the Gaza Strip.

• Hezbollah: The Lebanese militant group has lost its top leadership to Israeli strikes and has been struggling since.

• Syria: A lightning offensive in December 2024 overthrew President Bashar Assad, a key Iranian ally and client.

• Houthis: The Iranian-backed rebels in Yemen have been pounded by Israeli and U.S. airstrikes.

Meanwhile, Iran's larger partners have not offered overt military support. China remains a major buyer of Iranian crude oil but has not provided military aid. Russia, which has used Iranian drones in its war on Ukraine, has also refrained from direct military involvement.

Figure 3: Anti-U.S. and anti-Israel murals in Tehran reflect the deep-seated geopolitical tensions that define Iran's foreign policy, even as its regional influence wanes.

The Nuclear Question: Leverage or Liability?

For decades, Iran has insisted its nuclear program is peaceful. However, its officials have increasingly threatened to pursue a nuclear weapon. Before the U.S. attack in June, Iran was enriching uranium to near weapons-grade levels—the only non-nuclear-weapon state to do so.

Tehran has also scaled back its cooperation with the International Atomic Energy Agency (IAEA), the U.N.'s nuclear watchdog. The IAEA's director-general has warned that Iran could build as many as 10 nuclear bombs if it chose to weaponize its program. U.S. intelligence agencies assess that Iran has not yet started a weapons program but has taken steps to "better position it to produce a nuclear device."

In a potential signal to the West, Iran recently claimed it was no longer enriching uranium anywhere in the country. However, no significant negotiations to ease sanctions have occurred in the months since the June war.

A History of U.S.-Iran Tensions

The current standoff is rooted in a long and complex history. Before 1979, Iran was a top U.S. ally under Shah Mohammad Reza Pahlavi. The 1953 CIA-backed coup that cemented the shah's rule laid the groundwork for future animosity.

The 1979 Islamic Revolution led by Ayatollah Ruhollah Khomeini created Iran's theocratic government and shattered the alliance. The subsequent U.S. Embassy hostage crisis severed diplomatic relations entirely. During the 1980s Iran-Iraq war, the U.S. backed Saddam Hussein, attacked Iran's navy, and shot down an Iranian commercial airliner.

Relations saw a brief high with the 2015 nuclear deal, which lifted sanctions in exchange for limits on Iran's nuclear program. But in 2018, President Trump unilaterally withdrew the U.S. from the accord, reigniting tensions that have continued to escalate.