Why is Iran’s economy failing, prompting deadly protests?

Four weeks aft shopkeepers successful Tehran’s expansive bazaar unopen their stores successful protestation implicit the tanking economy, overmuch of Iran is nether an net blackout arsenic protests, which swelled to wide demonstrations against Iran’s clerical rule, person quietened.

The hundreds of thousands of radical who took to the streets successful the aftermath of the shopkeepers’ protestation are present reported to beryllium staying astatine location pursuing the deaths and detention of galore protesters.

Iran’s authorities has not released an authoritative decease toll, and estimates astir however galore radical person died successful the protests vary. But the widely-cited United States-based Human Rights Activists News Agency (HRANA) enactment the decease toll astatine 2,615 connected Wednesday this week. Iran’s authorities claims numbers person been vastly exaggerated.

Tensions with the US escalated this week erstwhile President Donald Trump threatened to instrumentality enactment if killings continued, but past appeared to backmost down connected Wednesday nighttime erstwhile helium said helium had received assurances from Tehran that the killings would halt and executions of detained protesters would not instrumentality place.

But portion protesters whitethorn person been silenced for now, their concerns stay acold from resolved. The menace of involution by the US remains precise real, and, critically, the dire economical conditions that archetypal prompted protestation successful the closing days of 2025 person lone worsened.

Why person protests erupted implicit the economy?

“The caller unrest was undoubtedly rooted successful economical distress,” Hassan Hakimian, emeritus prof of economics astatine SOAS, told Al Jazeera. “Decades of chronic corruption and extended economical mismanagement were accentuated by planetary economical sanctions, adding to the misery of ample swaths of mean people.”

On apical of this, Hakimian said, Iran has suffered terrible environmental-related problems successful caller months – “critical water shortages, powerfulness outages and crippling air pollution – generating a cleanable economical storm”.

The worth of the Iranian rial, whose adjacent illness connected December 28, erstwhile it fell to a record low against the dollar, archetypal prompted the protest, remains astatine a low.

Banking ATMs are offline, flights and currency transactions stay limited, casualties of the shutdown of the National Information Network, Iran’s state-controlled home intranet, which is fundamentally the country’s internet.

“If you deliberation of the shutdown arsenic having tally for astir a month, past we tin reasonably accidental that Iran’s system has tally astatine astir 50 percent capableness implicit that period,” Djavad Salehi-Isfahani, an economics prof astatine Virginia Tech, said. “Assuming that’s correct, you’re looking astatine a nonaccomplishment of astir a tenth of the country’s GDP if that extends to a month. How overmuch that is successful dollars depends connected what currency conversion you use. They alteration each the time, but, implicit a year, it’s apt determination betwixt $20bn and $90bn.”

How person sanctions affected the Iranian economy?

Iran’s system contiguous is unrecognisable from that astatine the clip of the 1979 Islamic revolution, arsenic war, sanctions and shifting economical priorities person slowed it to a crawl, experts say.

One of the main reasons is that Iran is 1 of the most heavy sanctioned countries successful the world.

Economic sanctions connected Iran, opening with those imposed by the US successful the immediate wake of the revolution, followed by further tranches imposed by the United Nations implicit its atomic programme successful 2006, person played a cardinal relation successful tilting Iran’s system to the constituent of collapse. Israel’s onslaught successful June past year, which resulted successful a 12-day warfare betwixt the 2 countries, further undermined confidence.

The US archetypal imposed sanctions connected Iran successful 1979, erstwhile the Islamic gyration overthrew the shah, oregon monarch, Mohammad Reza Pahlavi, whose forces notoriously utilized repression and torture to support him successful power, without a antiauthoritarian mandate.

In 1979, Washington besides halted lipid imports from Iran and froze $12bn successful Iranian assets.

In 1995, then-President Bill Clinton issued enforcement orders preventing US companies from investing successful Iranian lipid and state and trading with Iran. A twelvemonth later, the US Congress passed a instrumentality requiring that the US authorities enforce sanctions connected overseas firms investing much than $20m a twelvemonth successful Iran’s vigor sector.

In December 2006, the United Nations Security Council imposed its ain sanctions connected Iran’s commercialized successful nuclear-energy-related materials and exertion and froze the assets of individuals and companies progressive successful activities pertaining to it.

In consequent years, the UN toughened sanctions and the European Union besides followed suit.

In 2015, Iran signed a atomic woody – the Joint Comprehensive Plan of Action (JCPOA) – with the US, United Kingdom, China, France, Germany, Russia and the EU. Under that pact, Iran agreed to refrain from immoderate uranium enrichment and probe into it for 15 years.

But successful 2018, during his archetypal word arsenic president, Trump unilaterally withdrew the US from the atomic pact and reimposed each sanctions connected Iran.

In 2019, the Trump medication designated Iran’s Islamic Revolutionary Guard Corps (IRGC) a “foreign violent organization”. Additionally, Trump imposed sanctions targeting petrochemicals, metals (steel, aluminium, copper), arsenic good arsenic elder Iranian officials.

On January 3, 2020, aft the US assassinated Qassem Soleimani, the caput of the IRGC’s elite Quds Force, successful a drone onslaught successful Baghdad, Iraq, it besides imposed much sanctions connected Iran.

In September 2025, the UN’s sanctions were reimposed connected Iran implicit its atomic programme erstwhile the UNSC voted against permanently lifting economical sanctions connected Iran.

Currently, nether US and different planetary sanctions, astir each of Iran’s lipid revenues stay frozen. Additionally, assets held overseas are frozen, commercialized is restricted, and banks person been targeted.

Financial networks and companies linked to the improvement of Iran’s nuclear, ballistic-missile web and entities, specified arsenic the Islamic Revolutionary Guard Corps, which galore successful the planetary assemblage clasp liable for home repression, are besides sanctioned and are not permitted to bash concern with the US oregon different nations levying sanctions.

Now, China buys much than 80 percent of Iran’s shipped oil, information for 2025 from analytics steadfast Kpler shows. Much of it is transported by a “shadow fleet” of lipid tankers which alert mendacious flags oregon power disconnected tracking devices to debar sanctions.

How has this affected radical successful Iran?

Even earlier the struggle with Israel past year, galore economists regarded Iran’s system arsenic locked successful a play of “stagflation”, arsenic sluggish maturation – estimated by the International Monetary Fund astatine conscionable 0.6 percent per twelvemonth – combined with soaring prices, robbed galore successful Iran of their past hopes for a unchangeable aboriginal for themselves and their families.

Economists mostly see an yearly economical maturation complaint of 2 to 3 percent to beryllium ideal.

Over the past 8 years, Iranians’ purchasing powerfulness – the worth of the wealth they person to spend, compared with prices – has fallen by much than 90 percent. Food prices person soared by an mean of 72 percent compared with past year, arsenic the rial has collapsed against the US dollar, authoritative statistic show.

In December 2025, 1 US dollar was priced astatine astir 1.36 cardinal rial successful the unfastened market, the rial’s worst complaint ever.

Then, successful aboriginal January, arsenic protests were successful afloat swing, the Iranian rial dropped adjacent further to 1.42 cardinal against the US dollar – a 56 percent driblet successful worth successful conscionable six months and a crisp diminution from astir 700,000 successful January 2025.

Meanwhile, astir 1 successful 5 young radical is retired of work.

Why is the rial speech complaint important?

“One of the cardinal economical indicators that truly matters to radical is the speech rate,” Iranian American economist Nader Habibi explained. “People wage existent attraction to wherever the dollar is against the rial and, arsenic their uncertainty grows, truthful does the magnitude of hard currency they store, specified arsenic dollars oregon gold.”

According to Habibi, shortages successful the proviso of hard currency pursuing Israel’s onslaught successful June past year, arsenic good arsenic contention for funds from a authorities scrambling to rebuild and support its defences aft 12 days of war, sent assurance successful the Iranian system reeling and accelerated the illness of the rial.

“The accelerated devaluation of the rial was much than adjacent blimpish elements of society, specified arsenic the Bazaaris, could header with,” Habibi said, referring to the communal sanction for the shopkeepers who enactment successful the expansive bazaar.

“Imagine you privation to merchantability a TV. Say you merchantability it and the adjacent time you request to bargain different to replenish your inventory,” helium explained. “Everything depends connected the quality to bargain a caller TV astatine a terms little than that which you sold the past 1 for. However, aft the rial collapsed, that was thing the Bazaaris nary longer felt they could do, truthful they unopen their shops and took to the streets.”

What volition hap now?

“The protests person calmed successful the past 2 oregon 3 days due to the fact that of the sheer fig of radical killed. That’s wherefore radical did not spell out,” one Tehran resident, who did not privation to beryllium named, told Al Jazeera.

However, radical stay aggravated astir the authorities of the economy, experts say. “The world is that the authorities has nary speedy hole to alleviate the dire concern it confronts this time. Even if it were to win successful suppressing the protests by brute force, the underlying issues volition not beryllium going away,” Hakimian, the economics professor, said.

Outside involution by the likes of the US is improbable to help, helium added.

“Those favouring kinetic enactment place its mediocre grounds successful the portion and its likelihood to complicate an already hard situation, whether done collateral harm successful Iran oregon wider determination conflict.”