October 1, 2026

Executive Summary

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Iran’s worsening economy remains the regime’s greatest vulnerability, but war weariness and heightened repression are likely to suppress large-scale protests until the fighting ends. At the same time, ascendant hardliners and regime pragmatists are struggling over whether to prioritize resistance or economic relief, producing competing policies and complicating negotiations with Washington. Tehran will probably resist concessions that weaken its strategic deterrent while seeking targeted financial relief to stabilize the economy—risking renewed public unrest after the war if ordinary Iranians see little improvement in their lives.

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Methodology Note

From late April to mid-May, Arcanum was able to survey 30 Iranians across the country on political and economic concerns and the war. The sample was not randomized nor weighted and cannot be considered a representative sample. Nonetheless, Iranian voices are rarely heard outside the country due to political repression, internet blackouts, and the lack of Western media. This survey represents a small snapshot of how some Iranians, most with access to internet and/or satellite TV, are viewing current events and how they differ from government messaging.

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Economy Remains Regime’s Biggest Vulnerability

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Average Iranians are struggling with soaring inflation, high unemployment, and a currency collapse that have significantly worsened since the war with the United States and Israel began in late February. In August, inflation was 84 percent year on year, almost double what it was during the nationwide protests in January, according to Western press reports. In August, the state Statistical Center of Iran admitted that the price of cooking oil had increased by 383 percent, eggs by 295 percent, milk by 147 percent, and government-regulated bread prices by 100 percent. Iranian state news agency IRNA is reporting stories of housewives facing theft charges for stealing food for their families, indicating that there is growing desperation amongst the Iranian public.

• In addition to the increase in the daily cost of living, war shortages and an extensive internet blackout led to a wave of layoffs in the technology and manufacturing sectors, in which as many as two million Iranians, 7 percent of the workforce, lost their jobs. 300,000 Iranians applied for unemployment just since the war began.
   

• On September 28, the Iranian rial hit a record low, trading at 2.45 million rials to the dollar due in part to the U.S. naval blockade. The spiraling currency had already led to protests in late December 2025 when it was trading at 1.5 million to the dollar.
   

Most Iranians appear to be focused on day-to-day survival, making large-scale protests very unlikely at least until the U.S. and Iran agree to a durable ceasefire. Average Iranians have expressed hopelessness in interviews with Western news outlets, noting they are less focused on politics and more focused on their immediate needs. Tehran, in return, has deepened repressive measures, raising the costs for political opposition.

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• Protests this summer over missed wages or layoffs appear to have been small and slow to expand compared to last December, when protests spread nationwide over a matter of days.
   

• Many analysts assess that the war strengthened public perceptions that the United States and Israel were trying to destroy the nation and its people, not just the regime, turning many against the West and providing the Iranian leadership greater political breathing room.
   

• In August, the UN Commissioner for Human Rights Volker Turk expressed alarm that executions had sharply increased since March and slammed Tehran for “using capital punishment to suppress dissent.”
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Hardliners Ascendant and Overconfident

The war has elevated a hardline camp of the Islamic Revolutionary Guard Corps (IRGC) that probably will face an ongoing struggle for control with regime pragmatists. New Supreme Leader Mojtaba Khamenei’s continued absence is enabling the infighting to fester and contradictory policies about the war and the economy to multiply.

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• Western press reports that the new Supreme Leader elevated hardliner Mohsen Rezaei to the Supreme National Security Council to consolidate control, noting that Rezaei is a mentor to Mojtaba.
   

• Additionally, a previously sidelined cleric, Hossein Taeb, whom Western news reports credit as encouraging unauthorized attacks in the Strait of Hormuz to undermine the ceasefire, is now in charge of the domestic paramilitary Basij.
   

• Nonetheless, more moderate politicians including President Masoud Pezeshkian and Speaker of the Parliament Mohammad Baghar Ghalibaf have remained in power, pushing for economic reform packages and calling for “a more inclusive state.” In June, the new deputy minister of the interior publicly cited a government-run poll that said 60 percent of Iranians did not believe their lives would improve in the future and harbored distrust of government institutions, pressing politicians to address concerns.
   

Leadership struggles are likely to continue producing discordant messages and policies on the economy. During his visit to New York in late September, Pezeshkian called for an end to the war, repeatedly pairing calls for diplomacy with warnings about the effects of war, sanctions, and the blockade on Iran’s economy.

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• Parliamentary Speaker Mohammad Bagher Ghalibaf said, “no matter how much military power we have, if our people are struggling…we will not achieve progress.”
   

• Conversely, hardliners are focused on measures that would enable Iran’s economy to endure a protracted conflict. Rezaei called on Iranians “to start producing the products they and society need in their homes” and to launch “an economic jihad” against the West. IRGC is also increasing its use of long-established sanctions evasion networks to keep trade flowing.

​The infighting will probably continue to drive competing priorities during negotiations with the United States, as the new government tries to balance the preservation of Iran's strategic deterrent and regional influence with concessions to ease shortages and bolster its own finances. The regime will be reluctant to compromise, but conditioning confidence building measures on needed financial relief may be possible. Iran’s approach to negotiations on the nuclear file with the United States will probably be the prime test, since Iran’s nuclear program sits at the intersection of nationalist demands for sovereignty and deterrence and technocratic pressure for sanctions relief.

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• Tehran is unlikely to fully surrender its stockpile, particularly after the war reinforced perceptions that Iran must retain indigenous capabilities to deter U.S. or Israeli coercion. Experts believe it may be willing to allow in monitors and some downblending in exchange for financial relief, especially if allies Russia and China are involved.
   

• Tehran is also likely to prioritize buttressing Iran’s regional deterrent, including rebuilding its proxy network and missile and drone capabilities and preserving its ability to threaten maritime flows through the Strait of Hormuz.
   

• Tehran is pushing for the release of its frozen foreign assets or sanctions relief to help stabilize the rial and finance needed imports. Allowing Iran access to some frozen assets or facilitating a shipment of needed medicines from India in exchange for a monitoring mission visit could incentivize the regime to take small, reciprocal steps.
   

• Tehran will probably insist on retaining some fee-based regime—for example, through “environmental” charges or mandatory Iranian insurance for passage through the Strait of Hormuz—as it would provide a consistent revenue stream less vulnerable to Western sanctions. Iran’s lead negotiator publicly said the Strait of Hormuz would “not return to pre-war conditions,” suggesting that Tehran still views some kind of fee as critical to any deal.

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Survey Suggests Economic Concerns Could Spark New Protests

According to a limited survey conducted by Arcanum this spring, average Iranians cite the country’s worsening economy, continuing international isolation, and corruption as their biggest concerns. Thirty Iranians nationwide were polled on political and economic questions between late April and early May, roughly a month before Tehran and Washington signed a memorandum bringing the war to a halt. Given conditions inside Iran, the poll was not randomized or weighted, but nearly 75 percent believed the economy was the country’s biggest issue, far above the war or political issues.

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• The responses from Arcanum’s survey track with reliable polling. A University of Maryland poll last summer—one of the last, reliable, Western open-source polls conducted inside Iran—found that six in ten respondents viewed the economy as Iran’s greatest challenge, even after the June 2025 war. A plurality of these respondents also chose economic change as the most important.
   

• Half of respondents also ranked international isolation and corruption as drivers of public frustration. Robust, overlapping sanctions on everything from petrochemicals to civil aviation have isolated Iranians from the outside world. Iran remains one of the most corrupt countries in the world—ranking 153 out of 182 countries on Transparency International’s Corruption index.