Majid Rafizadeh: Booming inflation in Iran with no peace deal in sight

No deal has yet been reached between Iran and the United States as Iran’s economy has entered one of the most dangerous and unstable periods in decades. Even before the latest military confrontation and intensified US pressure campaign, the Iranian economy was already suffering from severe structural weaknesses, high inflation, corruption, sanctions, declining foreign investment, unemployment, and a collapsing national currency. But the last few months have dramatically worsened the situation and pushed the country into a far deeper economic crisis. Recent reports indicate that inflation has surged to extraordinary levels.

The Iranian rial has continued its historic collapse. Reports indicate that the currency has fallen to record lows against the US dollar, reaching approximately 1.8 million rials per dollar in recent weeks. The collapse of the currency affects the purchasing power of people. Prices of goods have surged dramatically. Inflation has reportedly exceeded 50 percent annually.

This economic situation resembles a dry forest waiting for a spark. The conditions inside Iran are highly combustible. Economic grievances have historically played a central role in triggering uprisings and nationwide protests in Iran. Previous demonstrations erupted over inflation, unemployment, corruption, and deteriorating living standards. The current economic crisis is significantly worse than many of those earlier periods of unrest. The combination of inflation, currency collapse, declining living standards, and public frustration creates conditions in which another major uprising could emerge at any moment.

Internet shutdowns and deepening economic crisis

The Iranian government’s prolonged internet restrictions and shutdowns over the past two months have further intensified the country’s economic crisis and public frustration. Internet disruptions have severely damaged online businesses, digital commerce, banking transactions, and communication networks that millions of Iranians rely on for their livelihoods.

The economic damage is not temporary or superficial; it affects the foundations of the country’s financial system, production capacity, and public confidence.

Small businesses, freelancers, technology companies, online retailers, and entrepreneurs have suffered major financial losses as connectivity disruptions paralyzed economic activity and weakened already fragile consumer confidence. In a country already struggling with inflation, unemployment, sanctions, and currency collapse, the continued internet shutdowns have added another layer of economic hardship and instability.

Beyond the economic damage, the internet restrictions have also deepened public anger toward the government. Many Iranians increasingly view the shutdowns as an attempt to suppress dissent, prevent the spread of information, and control public discourse during a period of growing social and economic discontent.

The longer these restrictions continue, the more they risk fueling resentment among ordinary citizens, particularly younger generations and urban populations who depend heavily on digital communication and online economic activity. At a time when the government urgently needs economic recovery and social stability, prolonged internet shutdowns may instead further isolate the country economically, undermine productivity, and increase the possibility of wider unrest and demonstrations.

A society on edge of social unrest

Even Iranian officials and analysts have acknowledged that recovering from the current crisis could take years. The economic damage is not temporary or superficial; it affects the foundations of the country’s financial system, production capacity, and public confidence. Policymakers themselves recognize the scale of the deterioration and the enormous difficulty of restoring stability. It is becoming increasingly difficult to imagine how the Iranian government can continue indefinitely under these economic conditions without facing deeper domestic instability and broader social unrest.

The Trump administration still has approximately a little over two and a half years remaining in office, a reality that may significantly shape Tehran’s calculations; if Iranian leaders believe they can simply endure the pressure until the end of President Trump’s term, it is increasingly unlikely that the country’s economy can withstand three more years under the current conditions without severe consequences. Inflation, currency collapse, declining oil revenues, sanctions, internet shutdowns, and growing public frustration are already placing enormous strain on the Iranian economy and society. If US sanctions and economic pressure continue to intensify, Tehran faces mounting challenges that may become increasingly unsustainable over the long term.

Mounting pressure on Tehran to change course

As a result, the only realistic path forward for Iran is to seriously address US demands regarding its nuclear program and regional policies. This would require Iran to take substantial steps to reduce nuclear tensions, including addressing concerns surrounding its enriched uranium stockpile and broader enrichment activities; this includes the transfer or surrender of highly enriched uranium stockpiles.

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In addition, Iran needs to fundamentally reconsider its regional approach. Continued confrontation with Gulf states and attempts to expand regional influence through military pressure and proxy networks have imposed enormous economic and geopolitical costs. Tehran increasingly needs regional economic cooperation, investment, trade, and stability rather than continued confrontation.

Economic survival depends on major policy changes

Ultimately, both Iran’s military position and its economy have deteriorated significantly under the current pressure campaign. The economic crisis now represents one of the greatest threats facing the Iranian government internally. The continuation of inflation, currency collapse, unemployment, and declining living standards could eventually trigger widespread unrest and major rebellion inside the country.

Under these circumstances, the Iranian leadership may increasingly conclude that it cannot continue on its current path indefinitely. Issues such as serious engagement on the nuclear issue, reducing regional tensions, ending policies of confrontation toward neighboring states, and pursuing a constructive foreign policy are not merely diplomatic choices anymore, but economic necessities for the survival of the state itself.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Maghrebi.org. Dr Majid Rafizadeh is a Harvard-educated political scientist, specializing in US foreign policy and the Middle East. You can follow him on X: @Dr_Rafizadeh. This articles was originally published on Al Arabiya.

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