Four weeks after shopkeepers in Tehran’s grand bazaar shut their stores in protest over the tanking economy, much of Iran is under an internet blackout as protests, which swelled to mass demonstrations against Iran’s clerical rule, have quietened.
The hundreds of thousands of people who took to the streets in the wake of the shopkeepers’ protest are now reported to be staying at home following the deaths and detention of many protesters.
Iran’s government has not released an official death toll, and estimates about how many people have died in the protests vary. But the widely-cited United States-based Human Rights Activists News Agency (HRANA) put the death toll at 2,615 on Wednesday this week. Iran’s government claims numbers have been vastly exaggerated.
Tensions with the US escalated this week when President Donald Trump threatened to take action if killings continued, but then appeared to back down on Wednesday night when he said he had received assurances from Tehran that the killings would stop and executions of detained protesters would not take place.
But while protesters may have been silenced for now, their concerns remain far from resolved. The threat of intervention by the US remains very real, and, critically, the dire economic conditions that first prompted protest in the closing days of 2025 have only worsened.
Why have protests erupted over the economy?
“The recent unrest was undoubtedly rooted in economic distress,” Hassan Hakimian, emeritus professor of economics at SOAS, told Al Jazeera. “Decades of chronic corruption and extensive economic mismanagement were accentuated by international economic sanctions, adding to the misery of large swaths of ordinary people.”
On top of this, Hakimian said, Iran has suffered severe environmental-related problems in recent months – “critical water shortages, power outages and crippling air pollution – generating a perfect economic storm”.
The value of the Iranian rial, whose near collapse on December 28, when it fell to a record low against the dollar, first prompted the protest, remains at a low.
Banking ATMs are offline, flights and currency transactions remain limited, casualties of the shutdown of the National Information Network, Iran’s state-controlled domestic intranet, which is essentially the country’s internet.
“If you think of the shutdown as having run for around a month, then we can fairly say that Iran’s economy has run at around 50 percent capacity over that period,” Djavad Salehi-Isfahani, an economics professor at Virginia Tech, said. “Assuming that’s correct, you’re looking at a loss of around a tenth of the country’s GDP if that extends to a month. How much that is in dollars depends on what currency conversion you use. They change all the time, but, over a year, it’s likely somewhere between $20bn and $90bn.”
How have sanctions affected the Iranian economy?
Iran’s economy today is unrecognisable from that at the time of the 1979 Islamic revolution, as war, sanctions and shifting economic priorities have slowed it to a crawl, experts say.
One of the main reasons is that Iran is one of the most heavily sanctioned countries in the world.
Economic sanctions on Iran, beginning with those imposed by the US in the immediate wake of the revolution, followed by further tranches imposed by the United Nations over its nuclear programme in 2006, have played a central role in tilting Iran’s economy to the point of collapse. Israel’s attack in June last year, which resulted in a 12-day war between the two countries, further undermined confidence.
The US first imposed sanctions on Iran in 1979, when the Islamic revolution overthrew the shah, or monarch, Mohammad Reza Pahlavi, whose forces notoriously used repression and torture to keep him in power, without a democratic mandate.
In 1979, Washington also halted oil imports from Iran and froze $12bn in Iranian assets.
In 1995, then-President Bill Clinton issued executive orders preventing US companies from investing in Iranian oil and gas and trading with Iran. A year later, the US Congress passed a law requiring that the US government impose sanctions on foreign firms investing more than $20m a year in Iran’s energy sector.
In December 2006, the United Nations Security Council imposed its own sanctions on Iran’s trade in nuclear-energy-related materials and technology and froze the assets of individuals and companies involved in activities pertaining to it.
In subsequent years, the UN toughened sanctions and the European Union also followed suit.
In 2015, Iran signed a nuclear deal – the Joint Comprehensive Plan of Action (JCPOA) – with the US, United Kingdom, China, France, Germany, Russia and the EU. Under that pact, Iran agreed to refrain from any uranium enrichment and research into it for 15 years.
But in 2018, during his first term as president, Trump unilaterally withdrew the US from the nuclear treaty and reimposed all sanctions on Iran.
In 2019, the Trump administration designated Iran’s Islamic Revolutionary Guard Corps (IRGC) a “foreign terrorist organization”. Additionally, Trump imposed sanctions targeting petrochemicals, metals (steel, aluminium, copper), as well as senior Iranian officials.
On January 3, 2020, after the US assassinated Qassem Soleimani, the head of the IRGC’s elite Quds Force, in a drone strike in Baghdad, Iraq, it also imposed more sanctions on Iran.
In September 2025, the UN’s sanctions were reimposed on Iran over its nuclear programme when the UNSC voted against permanently lifting economic sanctions on Iran.
Currently, under US and other international sanctions, nearly all of Iran’s oil revenues remain frozen. Additionally, assets held overseas are frozen, trade is restricted, and banks have been targeted.
Financial networks and companies linked to the development of Iran’s nuclear, ballistic-missile network and entities, such as the Islamic Revolutionary Guard Corps, which many in the international community hold responsible for domestic repression, are also sanctioned and are not permitted to do business with the US or other nations levying sanctions.
Now, China buys more than 80 percent of Iran’s shipped oil, data for 2025 from analytics firm Kpler shows. Much of it is transported by a “shadow fleet” of oil tankers which fly false flags or switch off tracking devices to avoid sanctions.
How has this affected people in Iran?
Even before the conflict with Israel last year, many economists regarded Iran’s economy as locked in a period of “stagflation”, as sluggish growth – estimated by the International Monetary Fund at just 0.6 percent per year – combined with soaring prices, robbed many in Iran of their last hopes for a stable future for themselves and their families.
Economists generally consider an annual economic growth rate of 2 to 3 percent to be ideal.
Over the past eight years, Iranians’ purchasing power – the value of the money they have to spend, compared with prices – has fallen by more than 90 percent. Food prices have soared by an average of 72 percent compared with last year, as the rial has collapsed against the US dollar, official statistics show.
In December 2025, one US dollar was priced at about 1.36 million rial in the open market, the rial’s worst rate ever.
Then, in early January, as protests were in full swing, the Iranian rial dropped even further to 1.42 million against the US dollar – a 56 percent drop in value in just six months and a sharp decline from about 700,000 in January 2025.
Meanwhile, nearly one in five young people is out of work.
Why is the rial exchange rate important?
“One of the key economic indicators that really matters to people is the exchange rate,” Iranian American economist Nader Habibi explained. “People pay real attention to where the dollar is against the rial and, as their uncertainty grows, so does the amount of hard currency they store, such as dollars or gold.”
According to Habibi, shortages in the supply of hard currency following Israel’s attack in June last year, as well as competition for funds from a government scrambling to rebuild and maintain its defences after 12 days of war, sent confidence in the Iranian economy reeling and accelerated the collapse of the rial.
“The rapid devaluation of the rial was more than even conservative elements of society, such as the Bazaaris, could cope with,” Habibi said, referring to the common name for the shopkeepers who work in the grand bazaar.
“Imagine you want to sell a TV. Say you sell it and the next day you need to buy another to replenish your inventory,” he explained. “Everything depends on the ability to buy a new TV at a price lower than that which you sold the last one for. However, after the rial collapsed, that was something the Bazaaris no longer felt they could do, so they shut their shops and took to the streets.”
What will happen now?
“The protests have calmed in the last two or three days because of the sheer number of people killed. That’s why people did not go out,” one Tehran resident, who did not wish to be named, told Al Jazeera.
However, people remain angry about the state of the economy, experts say. “The reality is that the regime has no quick fix to alleviate the dire situation it confronts this time. Even if it were to succeed in suppressing the protests by brute force, the underlying issues will not be going away,” Hakimian, the economics professor, said.
Outside intervention by the likes of the US is unlikely to help, he added.
“Those favouring kinetic action overlook its poor record in the region and its likelihood to complicate an already difficult situation, whether through collateral damage in Iran or wider regional conflict.”