Economic Crisis Sparks Mass Protests in Iran Following Rial Collapse

A wave of mass demonstrations and labor strikes swept across the Islamic Republic of Iran in late December 2025, representing a significant domestic challenge to the regime, reminiscent of the unrest seen in 2022. The immediate catalyst for the widespread protests, which began on Sunday, December 28, 2025, was the dramatic collapse of the national currency, the Iranian Rial (IRR), to a historic low against the US Dollar in the free market.

Merchants in the Grand Bazaar of Tehran led the initial actions, closing their stalls and shops to signal that the burden of the cost of living had reached an unsustainable level. This economic deterioration was underscored by official data showing annual inflation surpassing 40 percent in December 2025, with food inflation reaching 57.90 percent as of September 2025, approaching hyperinflationary levels. The economic discontent rapidly evolved into broader political defiance, as university students joined the demonstrations, chanting slogans directly targeting the Supreme Leader, Ali Khamenei, and calling for the government to prioritize domestic issues over regional involvements in areas such as Gaza or Lebanon.

The protests expanded nationally, encompassing cities including Kuhdasht in Lorestan Province, Shiraz, Karaj, Isfahan, and Yazd. State security forces responded with mass deployments, utilizing water cannons and tear gas in Tehran, while reports from Fars Province indicated the use of live ammunition. Casualties included the reported death of Amirhossam Khodayari Fard (21), a Basij militia member, while 'defending public order' in Kuhdasht, alongside two demonstrators reportedly killed in the southwest.

In response to the escalating crisis, President Masoud Pezeshkian, in office since July 2024, directed the Interior Minister to initiate dialogue with protest representatives, acknowledging the government's need to resolve livelihood issues. Concurrently, a leadership change occurred at the Central Bank: Governor Mohammadreza Farzin resigned and was succeeded by former Economy Minister Abdolnasser Hemmati. Government Spokeswoman Fatemeh Mohajerani stated the administration was 'listening' to the people, attributing the unrest to 'natural pressure' on livelihoods, while the Prosecutor General threatened a 'decisive response' to protests deemed 'riots.'

The underlying economic context is compounded by the 12-day military conflict between Iran and Israel in June 2025, following which the Rial depreciated by approximately 40 percent. This instability follows a year marked by increased state repression, with Iran Human Rights and HRANA reporting between 1,500 and 1,922 executions throughout 2025. The government had also previously announced sudden holidays in 21 provinces, citing cold weather, a maneuver that some interpreted as crowd management. The Rial’s collapse followed the failure of a parliamentary plan in October 2025 to redenominate the currency by cutting four zeros, failing to stem the market pressure leading to the year-end demonstrations. Projections place the 2026 annual inflation rate around 20.00 percent, indicating persistent structural challenges to economic stability.

Opposition figures amplified the political dimension, with Nobel Laureate Shirin Ebadi suggesting the Islamic Republic was in its 'final days,' and Reza Pahlavi calling for broader societal participation in calls for regime change. Meanwhile, political activist Mostafa Tajzadeh, from Evin Prison, warned that the lack of a clear exit strategy from the crisis could push Iran toward 'anarchy and chaos.' Analytically, the convergence of high inflation, currency collapse, and the aftermath of regional conflict has transformed basic subsistence grievances into a comprehensive political challenge to the governing structure.