Can Iran survive economic collapse and public anger?

A recent Economist article paints a sobering picture of Iran at the close of 2025, a country teetering on the edge of economic, social, and political collapse. After a year marked by war, financial turmoil, and environmental stress, public despair is widespread. The spark for renewed unrest came unexpectedly from Tehran’s electronics vendors on December 28, who staged a strike over the difficulties of buying and selling imported goods amid a collapsing currency. The unrest quickly spread to other businesses, including the politically symbolic grand bazaar, before reaching the streets of major cities such as Isfahan and Shiraz. Chants escalated from economic grievances to explicit anti-regime slogans, signalling a broader discontent with the country’s leadership.

The protests, though smaller than the mass demonstrations of 2009, represent the most significant unrest since 2022, when nationwide demonstrations erupted following the death of a young woman arrested over her dress. While the regime has cracked down decisively in smaller towns, large cities have largely avoided open confrontation. Nevertheless, several deaths and over 100 arrests have been reported, highlighting the tension simmering under the surface. The economic backdrop is stark: the Iranian rial has lost more than 40% of its value since June, with the dollar exchange rate hitting a record 1.4 million rials. Inflation exceeds 40%, and minimum wages, despite doubling over two years, barely reach $2 per day. Chronic energy and water shortages further compound the public’s grievances.

The article underscores that these protests are part of a recurring pattern in Iran’s post-revolutionary history, reflecting structural problems rather than isolated incidents. President Masoud Pezeshkian’s pledges of reform have been largely ineffective, constrained by a political system dominated by 86-year-old Supreme Leader Ayatollah Ali Khamenei, who resists meaningful concessions on nuclear and missile programmes that could lift sanctions. Attempts to rally nationalist sentiment and soften social restrictions, including reducing enforcement of the hijab, have failed to address the underlying economic and social frustrations of ordinary Iranians.

Complicating the domestic picture are two unpredictable external factors. Israeli Prime Minister Benjamin Netanyahu has indicated interest in renewed air strikes against Iran’s missile programmes, while U.S. President Donald Trump has issued a stark warning against crackdowns on protesters, claiming the United States is “locked and loaded” to intervene. The spectre of foreign intervention injects additional uncertainty into Iran’s already volatile political environment, leaving both the regime and the public unsure how events might unfold.

Despite widespread dissatisfaction, the protests lack key ingredients for systemic change: scale, leadership, and fractures within the ruling elite. Most Iranians, while frustrated, remain reluctant to take to the streets, and the opposition is fragmented and leaderless. Past patterns suggest that this round of unrest may either fizzle out or be suppressed. Yet the combination of economic collapse, environmental pressures, domestic discontent, and looming foreign threats makes Iran a powder keg, where small sparks could have unpredictable consequences.

In sum, the Economist article depicts a nation caught between internal dysfunction and external pressures, with a government struggling to maintain control and a population increasingly aware of its precarious circumstances. Iran’s future in early 2026 remains uncertain, with the interplay of domestic grievances and international provocations creating a highly unstable landscape.

By Vugar Khalilov