The 40-day war opened by US and Israeli strikes on Iran did not end so much as change state. Diplomacy and low-intensity fighting now run in parallel: by the second week of June a fresh exchange (a US helicopter down near Hormuz, retaliatory US strikes on southern Iran, Iranian missiles against bases in Jordan, Kuwait and Bahrain) was unfolding at the same time as Qatari shuttle mediation in Tehran. Both capitals insist they want a deal; neither behaves as though one is close. Beneath the military layer sit three structural problems that will outlast any ceasefire. The succession is unresolved: Ali Khamenei, killed in the opening days of the war, remains unburied 100 days on, and his designated successor and son Mojtaba has not been seen in public. The economy is in freefall. And the population is being pushed toward subsistence. The Islamic Republic survived decapitation, but it now governs a hollowed state with an unconvinced public, and its leadership is trying to convert a war it did not win into a deterrence doctrine it can sell at home.
The leader who will not be buried. One hundred days after Khamenei’s death, the regime has neither held his funeral nor presented his successor. Officials promise a multi-city procession ending in Mashhad, but the delay sits awkwardly with Shi’ite custom and has fuelled speculation about the state of his remains (other officials killed in the same strike were identified weeks later by DNA). Mojtaba Khamenei, said to have survived with minor injuries, would rank among Israel’s priority targets – making the very public appearance a succession requires a security liability. The result is an unusual limbo at the top of the system.
A red line drawn through Beirut. A highly consequential political move was Tehran’s decision to fire on Israel in response to Israeli strikes on Beirut’s southern suburbs, then make any further restraint conditional on Lebanon. Expediency Council chair Sadegh Larijani called it “the official declaration of a strategic doctrine”; Ghalibaf claimed Iran had overturned a “ceasefire on paper.” The claim that attacks on Hezbollah will now trigger direct Iranian retaliation is an attempt to rebuild deterrence cheaply after a costly war, but it hands Tehran’s truce to events on Israel’s northern border, and ordinary Iranians online openly fear the “Beirutization” of their own country. The Israeli calculation runs in the opposite direction but points to the same fragile equilibrium. Israel is likely to avoid sustained strikes on Beirut – which would invite the very tit-for-tat that risks drawing in Washington – and to concentrate instead on southern Lebanon, taking ground and degrading Hezbollah while staying deliberately below the threshold that would trigger an Iranian response at scale. A return to Beirut, more probable if Netanyahu comes under domestic pressure and rocket fire resumes, is the signal to watch: it would close the diplomatic space quickly. Defence Minister Israel Katz set out the limit bluntly on 8 June, warning that any Iranian attempt to tie Lebanon to Iran and strike Israel “will be met with great force.”
“Negotiating about negotiating.” Talks are clearly deadlocked. Trump dismissed Iran’s latest proposal – a 14-point package demanding US withdrawal from Iran’s periphery, war reparations, full sanctions relief and a new legal regime for Hormuz – as “totally unacceptable.” Tehran is deferring the nuclear file (Washington’s focus remains 60% enrichment) and prioritising an end to the war, asset release and Hormuz. Ghalibaf leads the negotiating team; Pakistan and Qatar are mediating; and Iran increasingly casts China as the only guarantor it would trust. Former diplomats quoted in Tehran expect not a settlement but “prolonged low-intensity military encounters.”
The hardliners turn on each other. A far-right MP, Kamran Ghazanfari, accused President Pezeshkian of accepting the ceasefire without the Supreme Leader’s authorisation. He was slapped down by mainstream conservatives, including the IRGC-linked Javan, who branded him a liability who “insults the leadership” he claims to defend. The episode is less about Pezeshkian than about the establishment choosing state stability over factional purity, and it incidentally buys the embattled president some breathing room. It is a useful indicator that the conservative bloc is fragmenting under post-war strain.
Policing belief and exile. Repression continued on several tracks. Eyewitness testimony coming to light now detailed the January crackdown in Rasht – security forces firing on protesters, charging families for the return of bodies, forcing secret night burials. A dissident cleric, Soleimani Ardestani, was jailed and defrocked for questioning state-backed Shi’ite narratives, showing how fast a doctrinal dispute becomes a security case. The judiciary is seizing diaspora assets explicitly to thin out embassy protests abroad, and student protests over the konkur (Iran’s national university entrance examination) rules spread to more than 20 provinces.
Rial. The black-market rate for the IRR ends the reporting period at 1,788,000 to the USD, having very marginally strengthened through May.
Diets at survival level. The clearest read on the economy is in the kitchen. Central Bank data for the past four weeks put year-on-year inflation at 161% for dairy and eggs, 176% for meat and 267% for oils and fats; red-meat demand has fallen by about half. Iranians describe eliminating animal protein entirely and substituting meat stock for meat. This is no longer a cost-of-living story but a nutrition story, with doctors warning of anaemia and child malnutrition, and is the most politically combustible variable the regime faces.
Crypto: the new sanctions frontier. The US Treasury designated Nobitex – which reportedly handled more than half of all Iranian digital-asset inflows in 2025 – alongside Wallex, Bitpin and Ramzinex, citing IRGC links, ransomware and Central Bank stablecoin access. The move marks a deliberate shift from banks to blockchains. It will not stop Iranian crypto activity, but it raises the cost and traceability of the workarounds Tehran has come to rely on, and pushes flows toward thinner, riskier channels.
Frozen assets as a bargaining chip. Washington is weighing use of frozen Iranian assets (tens of billions, held in South Korea, Iraq and elsewhere) to compensate Gulf states for war damage, provoking fury in Tehran, where asset release is a core negotiating demand. Officials called it “war booty”; hardliners used it to attack Ghalibaf’s diplomacy (“the creditor turned into the debtor”). Trump has said he will not unfreeze anything before a deal. The funds are becoming a battlefield rather than a sweetener. One of Trump’s key criticism of JCPOA – and Obama’s foreign policy more generally – was the transfer of cash from the US and others to Iran, making the issue a lightning rod for him politically.
Fighting under the ceasefire. Mid-month brought the sharpest exchange since April. After a US military helicopter crashed near Hormuz on 8 June – Iran officially denied responsibility- the US struck “military infrastructure” in southern Iran, and Iran said it had hit US bases in Jordan, Kuwait and Bahrain and downed an MQ-9 UAV. Trump threatened “complete catastrophe” if any American is killed and floated strikes on power plants and bridges. The likeliest path remains managed, intermittent fighting around a deal neither side will abandon — but the margin for miscalculation is thin.
Israel’s open goal: regime change. Israel is not behaving like a state that considers the war over. New Mossad chief Roman Gofman took office vowing to continue the covert campaign, with both Netanyahu and the outgoing chief openly framing regime change as achievable. Expect intensified covert operations, recruitment and pressure on Hezbollah and Iran’s financial networks.
The war is not over; it has been rationed. Expect more of June’s pattern – periodic strikes, maritime brinkmanship and theatrical threats wrapped around a negotiation that grinds on through Qatari and Pakistani intermediaries – rather than either a clean settlement or a return to full-scale war. That equilibrium is unlikely to hold for long. Into July, mounting energy-market and economic pressure on Washington cuts both ways: it raises the incentive to close a deal and the temptation to break the deadlock by force, which makes the most probable rupture a US-initiated one rather than an Iranian one. The two variables most likely to trigger it are Lebanon, which Tehran has deliberately wired into its truce, and dead American service personnel in or around Hormuz. Watch, too, for the staging of Khamenei’s funeral and the first public appearance of Mojtaba: both are deferred not by grief but by calculation, and the timing will say more about the regime’s confidence than any communiqué. The deeper story is that Tehran’s leadership has emerged claiming victory while its citizens bear significant economic pain – a gap that sanctions, crypto crackdowns, a degraded internet and a sustained oil-supply shock will widen. A regime can survive a war and still lose its population; Iran now seems to be doing both at once.