Governing Crisis

On 28 December 2025, protests erupted across multiple cities in Iran in response to currency collapse and spiraling living costs. As the exchange rate grew more volatile, sections of Tehran’s Grand Bazaar and commercial centers shuttered. Rapidly shifting prices made imports, pricing and trade impossible.

The state moved quickly to implement an emergency measure embedded in its 2025–2026 fiscal-year budget package: It removed preferential foreign exchange rates for essential goods and key production inputs. Officials presented the move as anti-corruption reform and promised direct compensation through cash transfers and targeted support. In practice, the change accelerated an already rapid rise in prices and further eroded purchasing power, shifting the burden onto households. Official inflation in December was reported to be around 42 percent, but the cost of basic groceries rose much faster at 72 percent compared to a year earlier, pushing staples such as bread and dairy out of reach for large segments of the working class. By early January, the removal of preferential foreign exchange rates had only deepened the squeeze on everyday consumption, and protests escalated into mass demonstrations across the country that lasted for weeks.

It was not the first time Iranian officials have provoked unrest by introducing regressive measures in the name of reform. Over the past decade, successive governments have framed price liberalization and currency adjustments as necessary steps to stabilize markets and curb insider profiteering and corruption. In practice, these policies have functioned as austerity measures, transforming service-based welfare programs into cash-based handouts that quickly lose value amid chronic inflation.

The 2010, and later 2019, fuel price hikes are notable earlier examples of this shock politics, with the latter fomenting a mass uprising against deteriorating economic conditions. Both protests were put down with lethal repression. The current moment has followed the same arc at a higher intensity. This time, the masked austerity measures were implemented amid an economic protest. By mid-January the government was estimated to have killed thousands and had placed the country under an indefinite communication blackout (internet and phone) in