In-depth Analysis of Iran's Situation at the Beginning of the Year: The Regime's Dilemma Amidst Internal and External Challenges

From late 2025 to early 2026, Iran is experiencing a comprehensive systemic crisis. Nationwide protests triggered by a severe economic collapse continue to escalate, rapidly evolving from livelihood demands into political confrontation. Within the regime, divisions between reformists and conservatives have intensified, and the ruling foundation of the Supreme Leader Khamenei has begun to loosen. Externally, the U.S. and Israel are leveraging the situation to increase pressure, waging information warfare and conducting intelligence infiltration, while the distancing of Russia-Iran relations has left Iran diplomatically isolated. Under the intertwining of multiple contradictions, Iran stands at a crossroads determining the nation's fate. The direction of its situation is not only crucial for domestic stability but will also profoundly reshape the geopolitical landscape of the Middle East. From late 2025 to early 2026, Iran is experiencing a comprehensive systemic crisis. Nationwide protests triggered by a severe economic collapse continue to escalate, rapidly evolving from livelihood demands into political confrontation. Within the regime, divisions between reformists and conservatives have intensified, and the ruling foundation of the Supreme Leader Khamenei has begun to loosen. Externally, the U.S. and Israel are leveraging the situation to increase pressure, waging information warfare and conducting intelligence infiltration, while the distancing of Russia-Iran relations has left Iran diplomatically isolated. Under the intertwining of multiple contradictions, Iran stands at a crossroads determining the nation's fate. The direction of its situation is not only crucial for domestic stability but will also profoundly reshape the geopolitical landscape of the Middle East.

I. Core Trigger: Comprehensive Economic Collapse, Breach of Livelihood Bottom Line

The Iranian economy has now fallen into an irreversible state of collapse. The data from the end of 2025 pushed the livelihood crisis to its extreme, becoming the direct trigger for igniting social unrest. As of December 2025, the officially announced inflation rate had reached 42.5%, with food prices surging by 72% year-on-year, medical supplies prices rising by 50%. The sharp increase in basic living necessities has become unbearable for ordinary citizens. Currency depreciation has formed a vicious cycle; the exchange rate of the Iranian Rial against the US dollar plummeted from 817,500 at the beginning of 2025 to 1.42 million, accumulating a depreciation of approximately 330% over three years. Meanwhile, the average monthly household income is only 250-300 US dollars, while the basic cost of survival is as high as 400-600 US dollars, leaving most families struggling even to meet basic food and shelter needs. The Iranian economy has now fallen into an irreversible state of collapse. The data from the end of 2025 pushed the livelihood crisis to its extreme, becoming the direct trigger for igniting social unrest. As of December 2025, the officially announced inflation rate had reached 42.5%, with food prices surging by 72% year-on-year, medical supplies prices rising by 50%. The sharp increase in basic living necessities has become unbearable for ordinary citizens. Currency depreciation has formed a vicious cycle; the exchange rate of the Iranian Rial against the US dollar plummeted from 817,500 at the beginning of 2025 to 1.42 million, accumulating a depreciation of approximately 330% over three years. Meanwhile, the average monthly household income is only 250-300 US dollars, while the basic cost of survival is as high as 400-600 US dollars, leaving most families struggling even to meet basic food and shelter needs.

According to the World Bank assessment, Iran's economy has contracted by 1.7% in 2025 and is projected to further shrink by 2.8% in 2026, indicating continuously increasing downward pressure. This collapse does not stem solely from external sanctions; more fundamentally, it is rooted in the internal **chronic ailment of the military-financial-power complex structure**. After the U.S. withdrew from the Iran nuclear deal in 2018, Iranian oil was labeled as high-risk, and banks were excluded from the **SWIFT clearing network**, almost completely blocking formal oil exports and cross-border finance. In 2025, oil export revenues fell to 40 billion dollars, only half of the 2011 level, forcing reliance on gray-market survival tactics such as changing ship names and turning off signals. Meanwhile, Iran's **Islamic Revolutionary Guard Corps (IRGC) and various religious foundations have formed super-conglomerates, controlling over half of the nation's economic resources**. They monopolize profits through concessionary projects, shadow fleets, and tariff exemptions. Fuel smuggling alone reaches 12 million to 30 million liters per day, resulting in an annual loss of 4.1 to 8.1 billion dollars in potential revenue. Any reforms that touch these interest groups are difficult to advance, creating a vicious cycle of **stability maintenance relying on interest groups—reform obstruction—deterioration of people's livelihoods**.

II. Escalation of Social Unrest: From Livelihood Protests to Political Confrontation, a Wave of Unrest Sweeping Across the Nation

The complete economic collapse directly triggered Iran's largest social unrest in three years. On December 28, 2025, Tehran merchants initiated a protest by closing their shops due to operational difficulties, which rapidly spread to approximately 20 provinces, 222 locations across 78 cities nationwide, lasting over eight days. Unlike previous incidents, the demands of this protest quickly escalated from initially addressing economic issues to explicitly calling for the resignation of Supreme Leader Khamenei. In some areas, slogans even emerged supporting the restoration of the former Pahlavi dynasty. Protesters clashed directly with security forces, leading to violent acts such as storming police stations and attacking Revolutionary Guards bases. Unofficial data indicates the death toll from this round of protests has risen to 20 people. The complete economic collapse directly triggered Iran's largest social unrest in three years. On December 28, 2025, Tehran merchants initiated a protest by closing their shops due to operational difficulties, which rapidly spread to approximately 20 provinces, 222 locations across 78 cities nationwide, lasting over eight days. Unlike previous incidents, the demands of this protest quickly escalated from initially addressing economic issues to explicitly calling for the resignation of Supreme Leader Khamenei. In some areas, slogans even emerged supporting the restoration of the former Pahlavi dynasty. Protesters clashed directly with security forces, leading to violent acts such as storming police stations and attacking Revolutionary Guards bases. Unofficial data indicates the death toll from this round of protests has risen to 20 people.

Facing waves of protests, the Iranian government has continued its standardized repression tactics of **internet shutdowns + live ammunition**. Looking back at the November 2019 protests triggered by fuel price hikes, the death toll may have approached **1,500 people**; in the first nine months of 2025, Iran carried out at least **1,000 executions**, marking the highest annual number in 15 years, with **241 people** executed in October alone. Many sentences were hastily carried out under vague national security charges, lacking due process. Beyond economic pressures, **generational and gender conflicts** have further deepened social divisions: the younger generation, raised in the internet era and exposed to global multiculturalism, faces a system that still attempts to regulate their clothing and behavior with the ascetic ethics of over 40 years ago. The **headscarf issue** has become a symbolic struggle over power, and the aftermath of protests sparked by **Mahsa Amini's death** remains unresolved. Instead, the government has systematically tightened policies targeting women and girls, further eroding the national identity of the younger generation. More alarmingly, public **trust in the regime's legitimacy has significantly eroded**. The official participation rate in the 2024 parliamentary elections was only **41%**, the lowest since the 1979 revolution, and the first-round turnout in the presidential election was also around 40%. Apathy and abstention have become a silent rejection of the existing political process by the people.

III. Internal Crisis of the Regime: Intensifying Divisions and "Exile Rumors," Weakening the Foundation of Rule

Behind the external turmoil lies severe internal division within the Iranian regime and the shaking of its ruling core. A clear opposition has formed inside the current regime: the reformist faction represented by President Pezeshkian, who initially hoped to respond to the crisis moderately and promote internal reforms, once ordered the Ministry of Interior to engage in dialogue with protesters; while the conservative faction represented by Parliament Speaker Mohammad Bagher Ghalibaf insists on a hardline suppression stance and currently still holds the dominant power in handling the protests. The first public speech by Supreme Leader Khamenei became a key factor in setting the tone for the situation. He characterized the protests as acts of provocation supported by foreign forces, urging security forces to take stricter measures, while also attempting to distinguish between legitimate protests and riots, demanding officials treat them differently. Ultimately, the strategy of adopting a dual approach to divide and weaken the protest forces was determined, but this ambiguous stance instead highlighted the leadership's hesitation and passivity.

More shockingly, Western media have reported that Khamenei has formulated a Plan B emergency evacuation plan: Due to the poor health of the 86-year-old Khamenei, along with incidents of desertion, defection, and disobedience among the military and police forces responsible for suppression, and the presence of centrifugal tendencies within the Revolutionary Guards, if the security forces fail to control the situation, he may follow the example of Syrian President Assad and flee to Moscow with 20 relatives and core personnel to seek refuge. His assets are suspected to have already begun transferring overseas. Although this rumor has not been officially confirmed, it forms a stark historical contrast with the 1979 Islamic Revolution—back then, the people abandoned the Pahlavi dynasty and chose Khomeini, yet nearly 50 years later, they are calling for the return of the king, reflecting public disappointment with the current regime. Additionally, the regime’s survival crisis is reflected in deep-seated governance failures: the government has directed substantial funds toward proxy wars in Gaza, Lebanon, Yemen, while neglecting domestic livelihoods; diplomatically, it is increasingly isolated, with its main ally Russia providing limited assistance, and Gulf Arab countries welcoming the collapse of its Shia hegemony. Even the economic advisor to President Pezeshkian has suggested that he publicly distance himself from Khamenei, shifting key decision-making responsibilities to the Supreme Leader. Behind such self-preservation advice lies panic and division within the regime. In response to the crisis, the Iranian Revolutionary Guards have conducted missile tests to demonstrate strength, and the authorities have taken measures such as replacing the central bank governor and distributing a monthly allowance of 7 dollars to citizens. However, the effects have yet to materialize, making it difficult to reverse the situation.

IV. Escalation of External Intervention: U.S.-Israel Pressure and Russia-Iran Estrangement, Diplomatic Deadlock Unsolvable

Iran's internal crisis has become a window of opportunity for external forces to intervene, with increased pressure from the United States and Israel exacerbating an already severe situation. Taking advantage of Iran's internal turmoil, the U.S. and Israel have simultaneously launched information warfare, psychological operations, and intelligence infiltration. Western media have deliberately amplified rumors of Supreme Leader Khamenei's exile to undermine the regime's foundation. Israeli Prime Minister Benjamin Netanyahu and U.S. President Donald Trump reached a consensus, with Netanyahu urging Iranian protesters that they are at a moment to decide their own fate, while Trump threatened on social media that if the Iranian government kills demonstrators, the United States will intervene, claiming to be fully armed and ready to act at any time. Furthermore, reports suggest that the U.S. and Israel have discussed the possibility of striking Iran in 2026. Trump also declared that he would completely destroy Iran's ballistic missile program and would support immediate strikes if Iran resumes its nuclear capabilities.

In addition to exerting pressure through public opinion, the United States and Israel have also launched a color revolution-style hybrid warfare. Their intelligence agencies have been accused of infiltrating Iran, bribing officials, providing cyber support, and spreading subversive information. The United States also plans to fully support Israel in disarming Hamas and to restart military strike options against Iran. However, it is worth noting that Netanyahu privately asked Russian President Putin to convey a message to Tehran, stating that Israel currently has no intention of escalating the situation or attacking Iran, and expressing concern that Iran might make a strategic miscalculation and launch a preemptive strike. This contrast between public toughness and private avoidance of war reflects the caution of the United States and Israel toward direct conflict. Meanwhile, Russia, which Iran could have relied on, has seen its bilateral relationship with Iran grow distant due to diverging interests. Although Putin held a phone call with Pezeshkian on December 30, 2025, discussing energy, infrastructure cooperation, and the Iranian nuclear issue, Russia is unlikely to provide substantial assistance. It may only invest efforts to prevent a change in Iran’s regime if the collapse of the current Iranian government would impact its Middle East strategy.

What's worse, Iran's diplomatic credibility has completely collapsed, making it difficult to seek external support. Previously, during the Gaza conflict, Iran only verbally condemned Hamas, providing limited substantial aid. After Hamas leader Haniyeh was assassinated in Tehran, senior Iranian officials rushed to distance themselves from the incident. Lebanese Hezbollah leader Nasrallah was precisely targeted and killed while meeting with Iranian advisors, with intelligence suspected to have been leaked internally. On the Syrian battlefield, 4,000 Revolutionary Guard troops fled without fighting, criticized for betraying their allies. More seriously, in exchange for U.S. concessions in the nuclear negotiations, Iran handed over the business records of dozens of Chinese companies in Iran to the United States, which became the trigger for the Huawei Meng Wanzhou incident, completely exhausting China's trust. Currently, Iran is trapped in an awkward predicament: wanting to surrender but not accepted by the U.S. and Israel, unwilling to shed blood in resistance, and seeking allies but having lost their trust. This diplomatic dilemma has further intensified its internal crisis.

V. Future Outlook: Four Major Game Points Determine the Direction of the Situation, and the "Cannot Show Weakness" Paradox Remains Difficult to Resolve

The direction of the current situation in Iran fundamentally depends on the interplay of four key points of contention: First, whether the Iranian government can effectively alleviate socio-economic tensions while suppressing protests, though without addressing the interests of powerful groups, any economic measures are unlikely to resolve the root causes. Second, whether domestic opposition forces (including figures such as the exiled Prince of the Pahlavi dynasty, Reza Pahlavi) can coalesce into an effective political force; currently, the opposition remains fragmented and lacks unified leadership. Third, how external actors (the U.S. and Israel) balance intervention with avoiding direct conflict. Their core objectives are to contain Iran’s nuclear capabilities and regional influence, rather than pursue full-scale occupation, making maximum pressure combined with proxy interventions a likely primary strategy. Fourth, the potential shifts in the regional landscape: if the current regime collapses, it could lead to the collapse of the Shiite resistance axis in the Middle East and a reshaping of the geopolitical order; if the regime stabilizes the situation, it may further intensify internal control and external confrontation.

Essentially, Iran is trapped in an unsolvable paradox of being unable to show weakness: multiple pressures—economic collapse, social unrest, and diplomatic credibility loss—are converging domestically, prompting the regime’s first response of harsh repression and external displays of strength. However, the more hardline it becomes, the more economic reform space shrinks, public discontent grows, and regime legitimacy erodes, creating a vicious cycle of the tougher the stance, the hollower the foundation. Some compare Iran to a building with a solid exterior but gradually corroding internal pillars; superficially, it still relies on military and administrative machinery to handle crises, yet each time it toughs out a crisis, it does so at the cost of sacrificing future legitimacy, economic vitality, and social trust. For Iran, the most critical issue now lies in its internal structural contradictions—the monopoly of the military-financial-power complex over the economy, the rigidity of the political system, and the erosion of social cohesion—which cannot be resolved simply by changing leadership. If Iran hopes to break through its predicament in the future, it must break the monopoly of interest groups and rebuild social cohesion. Yet, under current internal and external pressures, such a breakthrough seems distant. Whether the Axis of Resistance in the Middle East will fade with Iran’s transformation, and whether the Khamenei-led regime can survive this crisis, remains to be seen. However, one thing is certain: this ancient civilization stands at a critical crossroads of destiny, and every choice it makes will determine its future trajectory.