Iran emerged from the past month damaged but intact. By surviving the conflict, keeping the Strait of Hormuz closed, and imposing meaningful costs on its GCC neighbours, the Islamic Republic achieved its minimum objectives. The more important development is internal. A new leadership group with a higher tolerance for risk has coalesced around Mojtaba, who has still not appeared in public. This has not resolved the underlying competition for power among IRGC-linked figures. The ceasefire is fragile but likely to hold for now. It is enough to prevent an immediate return to war, but too limited to restore regional normality.
Power, Militarised. The figure who appeared to be directing events, Supreme National Security Council head Ali Larijani, was assassinated on 17 March. The initial consolidation around Larijani has since given way to a tighter circle of long-serving Revolutionary Guard veterans whose careers were shaped by war, internal repression and confrontation with the West. The prominence of Mohammad Baqer Qalibaf, Mohammad Bagher Zolghadr, Mohsen Rezaei and Ahmad Vahidi suggests a system relying more on security networks, institutional loyalty and coercive experience than clerical authority. It is less interested in political opening and more inclined to use negotiations to manage pressure than to pursue reconciliation. This new order is likely to bargain hard from a defensive and ideological position. Even where Tehran remains open to talks, the leadership appears more constrained by hardliner expectations, more dependent on the IRGC’s worldview, and more willing to absorb economic pain to ensure regime survival. The succession has therefore produced a narrower, more security-driven centre of power. In practical terms, this points to a hybrid leadership model in which formal authority sits with Mojtaba, but operational decision-making is increasingly shaped by a small circle of IRGC-linked political and security figures. It may still negotiate tactically, but it is unlikely to concede easily on core issues such as enrichment, regional influence or Hormuz.
Managed Dissent. Tehran’s diplomacy appears to be serving two purposes: bargaining with Washington and managing divisions within the regime. The broad delegation led by Qalibaf to talks with JD Vance in Pakistan suggests an effort to spread ownership of any eventual outcome across rival camps and reduce the political risk of engagement with the United States. Hardliners, technocrats, security figures and parliamentary actors have all been drawn into the process. That breadth may reflect fragility as much as unity. The leadership is trying to manage military damage, succession pressures and factional mistrust while still projecting control. Talks may be necessary, but the regime has not yet solved the political problem of how to absorb any compromise on enrichment, regional proxies or Hormuz.
Holding Pattern. That the Islamabad talks failed after 21 hours is unsurprising given the maximalist opening positions on both sides. Even so, the ceasefire is likely to hold because by 8 April the war was becoming politically and materially unsustainable for both Tehran and Washington. Both sides may still claim success in public, but the fact is that they had reached mutual exhaustion and mutual deterrence. Each retains the ability to inflict serious damage, but neither has found a politically acceptable path to decisive victory. This logic will probably preserve the truce for now. The most likely outcome is a messy endgame in which both sides exchange partial concessions, defer the hardest disputes, and attempt to restore a degree of normality around the Gulf without resolving deeper disagreements. For the moment, the region is in a political holding pattern designed to avoid a return to a war whose costs had already become too high.
Ceasefire Spillover. The Lebanon front has become both a stabilising factor and a reminder of how narrow the current de-escalation remains. Israel subjected southern Lebanon and Beirut to an unprecedented wave of bombing during the first days of the ceasefire with Iran. After public disagreement over whether the Israel-Hezbollah conflict fell within the scope of that ceasefire, with Iran saying it did and Israel and the United States denying this, a separate ceasefire between Israel and Lebanon was announced. This should modestly support US-Iran diplomacy by removing one immediate source of escalation and allowing Washington to claim progress on more than one front.
Iraqi Militia Leverage. The wider risk remains. Since the ceasefire announcement, Bahrain and Kuwait have been struck by missiles fired from Iraq. This highlights the continued utility of Iranian-aligned militias in Iraq as a deniable source of leverage. Even while formal diplomacy continues, Tehran retains the option of indirect escalation through its regional network.
Rial. The rial remained extremely weak at around 1,528,000 IRR/USD, though slightly stronger than on the first day of the war.
Reconstruction Burden. The most consequential economic development is the scale and likely persistence of the conflict damage. Official estimates now place wartime losses at around USD 270 billion, with other aligned estimates ranging as high as USD 300 billion. Iranian central bank officials are warning that recovery could take up to 12 years. The destruction is concentrated in sectors that matter most for foreign exchange earnings and industrial continuity: petrochemicals, oil and gas infrastructure, steel, and trade logistics. This is more than a short-term wartime shock. It points to a prolonged loss of output, fiscal capacity and export income. The effects are already hitting households directly. On current estimates, the loss amounts to roughly USD 3,000 per Iranian, a sum that exceeds a full year’s income for many workers. The damage is not just macroeconomic. It is being felt through lost jobs, weaker affordability and reduced access to basic goods, with the state facing reconstruction costs it cannot easily finance under sanctions and continuing instability.
Monetary Pressures. Even if the ceasefire holds, Iran’s economy appears set for another sharp repricing. Before the latest fighting, inflation had already reached extreme levels, with some reporting placing annual inflation above 70% and food inflation in triple digits. The war temporarily suppressed price discovery by shuttering markets, reducing transactions and interrupting normal demand. As markets reopen, underlying shortages, lost export capacity and renewed demand for foreign currency will reassert themselves all at the same time. The outlook for monetary stability is bleak. The rial has already weakened sharply, banks have imposed withdrawal limits, and the government has no credible tools left to defend the currency if export earnings remain impaired. The ceasefire will continue to expose the economy’s weakness.
Hormuz Dependence. The conflict is also likely to have reinforced Tehran’s view that control over the Strait of Hormuz is its main strategic deterrent short of nuclear capability. In this phase, however, that leverage is also becoming a major economic vulnerability. More than 90% of Iran’s trade depends on southern maritime routes, and the US blockade is expected to cut off nearly all seaborne trade, wiping out an estimated USD 435 million in daily economic activity. Crude exports of roughly 1.5 million barrels per day, petrochemical shipments, and essential imports all remain highly exposed, while alternatives such as Jask and Chabahar are far too limited to compensate. This matters because Iran’s economy is unusually exposed to prolonged maritime disruption. Storage constraints mean export interruptions could soon force well shut-ins, with the risk of permanent losses to oil production capacity. At the same time, reduced imports will deepen shortages, worsen inflation and intensify pressure on the rial. Economically, the blockade is threatening the basic functioning of Iran’s wartime economy. This creates a structural dilemma: the more Iran leans on Hormuz as leverage, the more it exposes its own economy to prolonged disruption.
Industrial Fallout. The industrial picture is especially severe in petrochemicals, one of the country’s most important export and feedstock sectors. US and Israeli strikes have disrupted around 85% of petrochemical export capacity, while broader damage to steel and industrial inputs is spreading through downstream production. Businesses are reporting shortages of raw materials, stalled operations and an inability to price goods profitably amid volatility. That disruption is now spilling into employment and domestic supply. Factory workers in multiple cities report layoffs, non-renewal of contracts, and closures linked to missing inputs and collapsing demand. Tehran has halted some petrochemical exports to prioritise the domestic market, a sign that the state is increasingly being forced to choose between export revenue and internal economic stabilisation. That trade-off is not sustainable and underlines the extent to which wartime damage is turning into a broader deindustrialisation risk.
Connectivity Crisis. The nationwide internet shutdown has moved well beyond a security policy response and is now a major economic blocker. Iran’s digital economy is around 5-6% of GDP, and the blackout has cut off entrepreneurs, small firms and freelancers from customers, platforms and payments. Direct losses are probably in the region of USD40 million per day equivalent, with estimates of indirect damage rising to double that figure. Online sales have collapsed and the disruption is feeding job losses well beyond the tech sector itself.
During this reporting period, the Iranian regime showed that it can absorb severe military and economic pressure and still preserve core state control. That does not mean it has stabilised. Leadership remains unsettled, power is concentrating in a narrower security elite, and the economy has suffered damage that is both severe and likely to endure. Whatever the near-term outcome of negotiations, the risk of serious internal instability over the next two to three years has increased. The key near-term variable is whether the current leadership can maintain cohesion under economic strain. Any visible fracture within the IRGC-linked leadership group, or a shift from controlled dissent to organised labour unrest, would mark a transition from managed instability to systemic risk.