The rial’s collapse is driving up the cost of everything from food to medicine and turning an economic crisis into unrest.  

Iran is in an economic crisis, and Iranians are feeling the pressure.

Years of simmering anger toward Iran’s oppressive regime are boiling over. Why now? Costs are exploding — and most Iranians are struggling to get by. What the public once endured when food and medicine were affordable is no longer tolerable.

Iran’s Economic Decline

Iran is being hit by a fresh wave of inflation, making daily life more expensive—and more uncertain—almost overnight. The price of essentials is climbing faster than paychecks, and the weakening Iranian currency—the rial—is “importing” inflation, driving up the cost of everything from food to medicine. The rial has also cratered in value—losing nearly half its worth against the U.S. dollar in 2025 alone—erasing purchasing power and pushing everyday prices even higher. There have been sharp price increases in everyday staples like cooking oil and eggs after recent policy changes, showing how quickly families can feel the impact.

Inflation is turning wages into pay cuts. Over the last year, the average salary has lost about 34% of its purchasing power — meaning 1,000 rials’ worth of goods a year ago now buys only about 660.

Iran’s Economic Collapse Leads to Protests

That economic strain is now causing mass unrest. When people watch their savings shrink and their wages buy less each month, anger turns into blame. Reporting from Iran’s bazaars highlights the shift: shopkeepers and traders have voiced deep frustration as the economy deteriorates. In that sense, protests aren’t separate from the inflation story. They’re one of the clearest signs that the economic crisis has become a broader crisis of confidence in the Iranian regime. As demonstrations spread, the government has responded with force, including arrests and internet blackouts, rather than meaningful economic relief.

Why Iran’s economy failed

There are several forces causing the inflation crisis in Iran:

  • Sanctions – U.S. and allied sanctions isolated Iran and restricted oil sales and access to reserves, reducing hard currency and raising import costs.
  • Rial depreciation – makes imported goods more expensive, pushing prices up across the country
  • Budget deficits – financed through money creation which fuels inflation.
  • Poor structural governance – corruption and distortion reduce investment and supply, keeping prices high.
  • Dollarization – people flee to dollars/gold, weakening the rial further and reinforcing inflation.

Why it matters

Iran’s inflation is warping the entire economy and making recovery harder.

When inflation stays high and the currency keeps sliding, normal economic life breaks down. Businesses cannot reliably price goods, plan payroll, or invest in inventory because costs can change overnight. Households stop saving and start protecting whatever they have, moving money into dollars, gold, and hard assets. That “flight to safety” puts even more pressure on the rial, which pushes prices higher again — a vicious cycle.

Over time, this cycle hollows out the economy. Investment declines, productive activity slows, shortages become more common, and black-market pricing expands. Even if the government tries short-term controls, inflation changes behavior in ways that are hard to reverse: people lose confidence in the currency, trust in institutions erodes, and economic stability starts to feel out of reach.

What is next

Iran’s leadership may be able to suppress unrest in the short term, but it has far fewer tools to stop inflation.

The problem is structural: as long as sanctions restrict hard currency, the rial remains vulnerable, and inflation remains easy to reignite. That leaves the government with a set of unattractive choices. It can tighten monetary policy and cut spending to slow inflation, but that risks deepening recession and public anger. Or it can keep spending to preserve stability, but that usually means more money creation — and more inflation.

The regime historically has prioritized control over reform. That likely means continued crackdowns and internet restrictions, combined with selective economic measures: temporary subsidies, price controls, and targeted cash support to quiet pressure without changing the fundamentals. These tactics can buy time, but they tend to worsen distortions and shortages — and often push more activity into informal or black markets.