Iran has entered 2026 in open systemic crisis. What began on 28th December as economically driven unrest has evolved into a nationwide political confrontation between state authority and social endurance. The collapse of confidence has been accelerated by three overlapping shocks – a currency and banking rupture, a prolonged digital blackout that paralysed daily life and a security response that has moved rapidly from containment to deterrence.
It is important to note that the current economic free fall did not begin in December alone. The Rial was already structurally weakened by the 12 day kinetic confrontation with Israel in June 2025. It accelerated capital flight, risk pricing and fiscal exhaustion before the banking shock hit.
The regime remains intact, but its legitimacy, economic credibility and coercive monopoly are all under growing strain. This is no longer a protest cycle. It is a stress test of the Islamic Republic’s governing model.
Protests. The current protest wave began on 28th December following sharp currency losses and price surges. It quickly spread from urban centres into provincial towns, drawing in workers, students, merchants and civil servants. While initially framed around cost of living pressures, slogans and mobilisation patterns soon reflected deeper political frustration. What distinguishes this phase is the breadth of participation. This is not a peripheral uprising. It has cut across social class and geography. The regime has responded with lethal force, mass arrests and narrative suppression. Verified human rights estimates place deaths at over 3,000, but multiple leaks and activist sources suggest the real toll may range between 12,000 and 20,000, particularly in Tehran’s outer districts and parts of Shiraz. The precise figure remains unknowable due to the information blackout, but the scale itself is the signal.
Why this matters. The protest movement has crossed from grievance into legitimacy challenge. The state’s choice to escalate force rather than absorb pressure suggests leadership sees this not as unrest, but as regime risk.
The “Digital Iron Curtain”. Between roughly 8th and 17th January, Iran imposed a near-total internet shutdown lasting approximately 200 hours. This was not a tactical outage. It was an operational blackout. Payments systems, banking access, logistics coordination and small-business trading were all disrupted. Informal markets froze. Salaries could not be accessed. Remittances stalled. This blackout did not just silence protest coordination – it temporarily paralysed the economy. Tehran is now accelerating plans for a semi-permanent domestic internet architecture that would keep most citizens inside a filtered national network while preserving a controlled state channel to the global web.
Why this matters. This marks a shift from censorship to structural digital sovereignty. Iran is prioritising regime security over economic integration. That trade-off will compound long-term stagnation.
USA. President Trump’s intervention into the Iran narrative has been unusually direct. His public calls for Iranians to “keep protesting”, his warnings over executions, and his claim that Iranian authorities cancelled 800 planned hangings following US pressure have all shaped Tehran’s threat perception. While the White House’s claim of 800 cancelled executions remains unverified by independent monitors, its impact on Tehran’s deterrence narrative is significant. What matters is not factual confirmation but political belief. Trump believes it, claims it publicly, and is likely to act on that belief. His rhetoric oscillates between pressure and tactical restraint, but the regime has used it consistently to frame the unrest as externally orchestrated.
Why this matters. Trump’s involvement gives Tehran a ready-made justification for securitisation while simultaneously raising the geopolitical cost of repression. This tightens, rather than loosens, the regime’s strategic corner.
Leadership vacuum. On 8th January, Reza Pahlavi issued a call for unified nationwide protests. While the movement remains largely leaderless, his intervention briefly gave it a symbolic focal point and increased diaspora coordination. The regime has used this to reinforce its “foreign-backed coup” narrative, but the deeper issue remains. Iran’s protest movement has no formal leadership, but it no longer lacks momentum.
Europe. It is important to restate that the UN snapback sanctions in September 2025 were triggered by the E3 – the UK, France and Germany – not just the United States. That severed Tehran’s remaining European diplomatic cushion. This matters now because Iran’s leadership is no longer dealing with a divided Western front. It is facing near-total diplomatic isolation across the Atlantic alliance.
Flashpoints. We have two massive calendar events looming. Anticipate that the following dates have been circled by both the regime and the protestors. 11th February (47th Anniversary of the Revolution – 22 Bahman). This marks the culmination of the “Ten Days of Dawn” and remains the regime’s most symbolically important display of national unity. If the opposition can disrupt these state sanctioned rallies or hold counter-marches, it will be a major symbolic defeat for Khamenei. 19th February (Ramadan begins). This is a massive tactical shift. Protests often move to the evening hours after Iftar (breaking the fast). But more important than that… Mosque based gatherings can provide “cover” for mobilization that street corners do not. In previous cycles, Ramadan has shifted protest dynamics from spontaneous street gatherings toward more organised, network-based mobilisation rooted in religious and community spaces.
Bank Ayandeh. While inflation and currency collapse dominate headlines, the immediate spark for middle-class mobilisation was the forced collapse and merger of Bank Ayandeh into Bank Melli in late December. This wiped out or trapped the savings of millions of middle-income depositors. It was not abstract inflation. It was personal financial loss. That moment turned economic frustration into political fury. Bazaar merchants joined protests not in solidarity with the poor, but in defence of their own erased capital. The uprising stopped being about survival and became about betrayal.
The impact went beyond lost savings. The forced merger created immediate liquidity bottlenecks inside Bank Melli, leaving many merchants unable to withdraw working capital to finance January imports. In several provincial bazaars this translated into short-term supply shortages and empty shelves, turning a banking failure into a visible market failure. What might have remained a financial grievance became a daily consumer reality.
FX. Just days before the protests, the Central Bank removed the preferential exchange rate for most food imports, retaining it only for wheat and medicine. The result was an immediate surge in food prices, with some categories jumping over 50%. This policy change, while technically rational, landed at the worst possible moment. Economic policy mis-timing turned structural weakness into political ignition.
Currency collapse. The Rial’s continued slide has destroyed what little credibility remained in monetary management. Households are now operating in survival economics. Informal Dollarisation is accelerating. Capital is moving defensively, not speculatively. Iran is no longer managing inflation. It is living inside it.
Bazaar defection. The most dangerous economic development is not poverty. It is the political defection of merchants, traders and SME owners who historically sat inside the regime’s transactional support base. This group is not ideologically opposed to the system. It is financially alienated by it. That is far harder to reverse.
Sanctions. With UN snapback in place, sanctions are no longer a diplomatic lever. They are an economic environment. Iran is operating under permanent financial isolation, not conditional restriction. Shadow trade sustains survival, not recovery.
Militarised repression. The regime is no longer policing protests. It is conducting internal security operations. IRGC and Basij units are deployed nationwide. Live fire has been used repeatedly. Arrest campaigns are coordinated. Hospitals are monitored. Families are pressured into silence. Judicial authorities are pursuing fast-track prosecutions, including death sentences, as deterrence theatre.
Foreign militias. Persistent reports indicate the presence of non-Persian speaking units in some urban operations, including personnel linked to Fatmiyoun and Zainabiyoun brigades. These claims remain unverified, but their persistence is significant. If accurate, it reflects regime insecurity about domestic loyalty within security ranks.
The strategic risk is not only reputational. If the regime is relying on non-Persian speaking units for crowd control, it signals uncertainty over the loyalty of Artesh conscripts and lower-level Basij drawn from the same communities now protesting. Over-reliance on external or sectarian forces carries a secondary danger: a nationalist backlash inside Iran’s own security institutions, where coercion may begin to feel less like duty and more like occupation.
IT. Despite blackout efforts, tens of thousands of clandestine satellite internet terminals remain active across the country. Recent external confirmations suggest Iran may now host a six-figure number of Starlink connections, fundamentally breaking the state’s monopoly over information flow. This makes the current unrest Iran’s first truly satellite-enabled protest cycle. The regime can still suppress streets, but it can no longer fully suppress narrative formation.
Border risk. Kurdish militant groups have claimed limited armed actions in response to the crackdown. While still marginal, this introduces a border-security layer into what was previously a civilian protest movement. Even limited militant spill over increases the regime’s internal threat perception and justifies further militarisation.
Near-Term Risk Signals. Three indicators will define whether Iran’s current crisis stabilises or accelerates over the coming weeks.
Labour. Any coordinated action by energy-sector workers in Khuzestan or South Pars would move the regime’s challenge from political to fiscal. Oil is not just revenue. It is liquidity, patronage and survival.
Currency. The Rial is no longer searching for equilibrium. It is searching for credibility. Continued informal Dollarisation now matters more than the official rate. If wage pricing follows FX pricing, inflation psychology becomes entrenched.
Security cohesion. The absence of Artesh defections does not equal confidence. The reported reliance on non-Persian speaking units risks feeding nationalist resentment inside Iran’s own coercive institutions, a dynamic the regime has historically struggled to manage.
Together, these three signals will determine whether February becomes a pause or an escalation.
Connectivity is slowly returning, currently estimated at around 2% of normal capacity. Historically, this phase precedes a shift from street confrontation to targeted night-time arrests, hospital surveillance and household intimidation. The regime will attempt administrative erasure rather than political reconciliation.
The next strategic red line is labour. If energy-sector workers in Khuzestan or South Pars coordinate strikes with bazaar networks, the regime’s calculus changes from difficult to critical. That remains the key near-term watch point.
Iran is not collapsing. But it is drifting into a model of survival governance. Think lower legitimacy, higher coercion, reduced economic ambition and deeper isolation. This model can endure. But it cannot regenerate.
Iran’s crisis is no longer about protests. It is about governing capacity. The state still controls the streets. But it is losing the future. Economic credibility has fractured, social patience is thinning, and repression is replacing legitimacy as the primary stabiliser. The Islamic Republic is surviving. But it is no longer convincing.