It's the economy, mullah! How the financial crash is fuelling Iran protests

The protests that began on 28 December in Tehran's traditional bazaar have since spread beyond the Iranian capital.

On the first day, some market traders in Tehran—part of the country's affluent class—closed their shops in response to the collapsing rial, which had made daily business impossible. President Masoud Peshkian quickly met with them to calm this influential group.

In poorer cities, particularly in the south and west, the unrest took a different direction as security forces grew more violent.

By last Monday, human rights sources reported that more than 190 protesters in about 50 cities were killed by members of the police, the Islamic Revolutionary Guard Corps (IRGC), and the Basij militias. The financial losses of the wealthy sparked Tehran's protests, but in other regions, years of growing poverty pushed lower-income Iranians into the streets.

For 47 years, repression, the silencing of dissent, strict Islamic laws, and limits on personal freedoms have fuelled waves of nationwide anti-regime demonstrations. Experts argue that these forces remain significant today, but the country's economic crisis is also central to the current movement.

Inflation and poverty

One expert inside Iran told The New Arab at the start of the protests: "Many cannot afford food for their families."

Ordinary people say the same.

"One day, the cooking oil becomes scarce, the next day, eggs. Our lives have become a daily struggle to find basic necessities at an affordable price," a Tehran resident told TNA during the first week of demonstrations. "And it's not easy, because prices are rising every day."

According to Iranian experts, many of whom are living through these problems, widespread corruption, misuse of oil and gas revenues, unfair budget allocations, government spending on proxy forces in the region, and international sanctions have driven inflation to extreme levels and crippled the economy.

"Inflation means people are losing their purchasing power, and in Iran it's happening daily," said a Tehran-based economist who asked not to be named for fear of arrest.

"In stable economies, prices may change every year or every few months, but in Iran, it happens every day. If a litre of yoghurt costs $1 today, it may cost $1.2 tomorrow. When you ask the shopkeeper why, they say the dollar went up," the economist added.

Official sources report that inflation exceeded 40 per cent in December, although experts believe the actual figure is higher. Regardless of the official figures, people observed their purchasing power decline day by day.

"The issue is not the announced inflation rate," another expert told TNA. "The issue is how much of a family's basic needs can be met with an ordinary salary. The real indicator in Iran is the dollar–rial exchange rate, because the prices of goods, rent, and transportation all depend on it."

On the day Tehran's protests began, the rial reached its lowest recorded value: one US dollar was exchanged for 1,450,000 rials.

The rial's vulnerability to political events is not new. Every major shock has come during periods of tension. In 2018, one dollar was worth 55,000 rials, and its value declined further after the US withdrew from the nuclear deal and launched the maximum pressure campaign.

Another sharp drop followed Israel's attack on Iran in June 2025. The dollar traded at approximately 800,000 rials during the 12-day war, and the decline deepened in the weeks that followed, with the exchange rate breaking records several times.

"The fall in global oil prices, the war with Israel, Trump's maximum pressure policy, and international sanctions all affect the rial," said the Tehran-based economist. "But government corruption and incompetence make everything worse."

Domestic corruption, international sanctions

Iranian officials blame US sanctions for the country's economic collapse. The EU followed Washington's lead, and since 2006, the UN has also targeted key sectors of Iran's economy.

When the first UN sanctions were imposed, one US dollar was about 9,000 rials. Then-President Mahmoud Ahmadinejad dismissed the UN resolution as "a torn piece of paper."

However, the effects of that document became clear later. Between 2006 and 2021, the number of Iranians living below the poverty line rose from 9 million to 25.5 million. By 2021, more than 14 million people lived in marginalised or informal settlements.

According to the Tehran-based economist, even under sanctions, Iran could have managed better if it had curbed corruption among officials and refrained from spending foreign exchange reserves on ideological projects.

He pointed to next year's budget, in which the Islamic Republic of Iran Broadcasting (IRIB), the country's only TV network and a key propaganda apparatus, received a 20 per cent increase in its budget. The Islamic Propaganda Organisation also saw its budget rise by 8 per cent.

The economist said another major source of lost oil revenue comes from companies linked to regime insiders. These companies are registered abroad and facilitate Iran's circumvention of sanctions, but they do not remit all funds owed to the government.

"These people are connected to the main circle of power; the regime cannot force them to return the money," he said. "This is why, during internal disputes, rival groups expose each other as sanctions profiteers, revealing the names of people who took millions of dollars to other countries."

These companies access cheap dollars meant for importing basic goods. Under Hassan Rouhani, they purchased government-priced dollars at 42,000 rials, while the market rate had climbed to 270,000 rials. Under Ebrahim Raisi, the subsidised rate rose to 285,000 rials, while the free-market rate passed 500,000 rials.

President Masoud Pezzekian himself admitted the corruption, saying, "Everyone received the dollar for 285,000 rials, but did not return it."

Despite this admission, Iran's Economy Minister announced during the recent protests that the practice would continue. This has led many Iranian experts to conclude that the government has no intention of combating corruption.

"We can clearly see that the government thinks the way to control protests is through repression," said the Tehran-based economist. "As long as the government refuses real economic reform and keeps spending on ideology instead of people's basic needs, the gap between the rulers and the public will only grow, and social uprisings will keep unfolding."

Currently, Iranian activists say that almost 550 people have been killed. The US-based Human Rights Activists News Agency said that 483 protesters have been killed and 47 members of the security forces have died in the increasingly violent protests.

Iran's Foreign Minister Abbas Araghchi claimed that the government has got the situation "under total control" after security forces began cracking down on the demonstrations amid an internet blackout.