By Esfandyar Batmanghelidj

For eight years, Iran has been subjected to the most comprehensive sanctions program ever devised, targeting nearly every sector of the Iranian economy. For forty days, Iran was targeted with one of the largest air campaigns in history, with nearly 100 airstrikes per day targeting military sites, government buildings, industrial facilities, and civilian infrastructure. While Iran’s economy has been significantly impacted by the war, the combination of sanctions, airstrikes, and most recently, a naval blockade has not led to an outright economic collapse.

Iran’s economic resilience has flummoxed U.S. officials and boosters of Trump’s “maximum pressure” sanctions. For eight years, U.S. policymakers promised that sanctions would “crush” the Iranian economy. Economic pressure was intended to achieve one of two outcomes. Either the Islamic Republic would make broad concessions to the United States, or it would be toppled in a revolution fueled largely by economic grievances. Instead, the U.S. found itself launching the kind of war that sanctions were meant to avoid. So far, the Iranian economy has demonstrated enough resilience to enable Iranian leaders to draw their much more powerful adversaries into an attritional conflict.

Despite waging economic war on Iran for the better part of two decades, American policymakers have a poor understanding of the Iranian economy. Numerous datapoints would have enabled the Trump administration to anticipate Iran’s ability to sustain most industrial output during wartime conditions.

Inventory Data

Perhaps the clearest indication of this underlying resilience can be seen in data for “days of inventory outstanding,” a standard measure of inventory levels of raw materials, work-in-progress goods, and finished products. This data can be found in the quarterly filings of the more than 700 companies listed on the Tehran Stock Exchange.

Looking at the most recent reports, which were filed in December 2025 in accordance with the third quarter of the Iranian calendar year that ended in March 2026, it becomes clear that Iranian firms held high levels of inventory at the outbreak of the war.

Inventory levels ranged between two weeks and six months depending on the subsector. On average, looking across 30 industrial subsectors, Iranian companies maintained 96 days of inventory. This is about 30 days more inventory than reported by European manufacturers, which have notably increased stock levels in recent years in response to geopolitical shocks. Iranian inventory levels exceed those maintained by American firms by about 40 days.

The variation in Iranian inventory levels is explained by the type of final product, import dependence, and sanctions vulnerability. Companies in subsectors that are largely exempt from sanctions, such as food and beverage manufacturing, or sectors that have limited dependence on imported intermediate goods, such as the petrochemical sector, typically maintain lower inventory levels.

Companies that are highly dependent on imported parts and equipment and are significantly targeted by sanctions, such as those in the industrial equipment or electrical machinery subsectors, maintain the largest inventories. Crucially, these are the sectors most closely connected to Iran’s defense production. Just as Iran reportedly maintains around 40 percent of its drone arsenal and 60 percent of its ballistic missile launchers after forty days of conflict, it also likely maintains extensive inventories of the materials and parts necessary to sustain production of those weapons systems.

Somewhat counterintuitively, Iranian firms have significant financial incentives to maintain large inventories, especially of imported materials and parts. In light of Iran’s persistent currency devaluation, companies use their inventories as a kind of inflation hedge. Rather than hold cash, companies seek foreign currency allocations from the Central Bank of Iran and import materials, parts, and machinery that are likely to appreciate in value in local currency terms. In this way, inventories provide a boost not only to supply chain resilience, but also to corporate balance sheets.

Importantly, the stock levels reported in company filings do not reflect availabilities of all materials or products, just an average. Across industrial subsectors, Iranian firms are beginning to run down inventories. Concerning shortages of certain goods have materialized following the disruptions of the war. But the practice of maintaining large inventories means that such pressures are mounting more gradually and slowly than many U.S. policymakers expected.

Bottom-Up Resilience

The upshot of this analysis is that Iran’s economy is more resilient to sanctions, pressure or blockades than is widely recognized. Should Iran experience a near total interruption in trade, inventories could be stretched in the face of depressed demand or managed through wartime rationalization. Of course, such interruptions remain unlikely, even if the U.S. blockade is strictly enforced. Around half of Iran’s non-oil trade is conducted via overland corridors and through Caspian Sea ports. The combination of large inventories, demand rationalization, and alternative supply chains suggests that Iran’s wartime economy could sustain most industrial production for at least three months, and possibly for as many as six, before significant contractions in output are felt.

Notably, unlike Russian policymakers, who mobilized state resources at the outset of the invasion of Ukraine to boost defense production and shore up domestic manufacturing, Iranian policymakers have largely left firms to their own devices, both during the eight years of sanctions and the recent forty days of war.

In this respect, Iran’s wartime endurance is less a reflection of the power of the Islamic Republic, and more an indication of the underlying structural resilience of the Iranian economy and the firms and households from which it is composed. Among industrial firms, resilience has been achieved through indigenization or diversification of supply chains, the maintenance of large inventories, and the prioritization of technological simplicity and efficiency. American policymakers did not account for these adaptations because they have not waged war against an industrialized country in over 80 years.

Shaped by years of sanctions disruptions, the Iranian approach to industrial management is characterized by a readiness for worst case scenarios, including military conflict. Ironically, Trump’s decision to impose maximum pressure sanctions, while contributing to a slowdown of economic growth in Iran, may have spurred the development of an industrial base more resistant to supply-chain shocks, such as the disruption to maritime traffic in the Strait of Hormuz. Arguably, Iranian leaders were only able to weaponize the closure of the strait because of bottom-up adaptations, such as high inventory levels, that made Iran’s economy less vulnerable to the inherent disruptions to maritime trade.

Of course, the greatest threat to Iran’s economy is not disruptions to trade flows, but rather direct targeting of industrial infrastructure and utilities by the U.S. and Israel. Attacks on major steel and petrochemical facilities have hit production in those sectors, putting millions of jobs at risk.

Trump’s threat to bomb Iran’s major power plants, issued just before the ceasefire went into effect, reflects U.S. frustration with the resilience of the Iranian economy. Destroying Iran’s power plants would absolutely hobble Iranian industrial production. But it would also constitute a war crime and would trigger catastrophic Iranian attacks against power plants and desalination facilities in the Gulf states. Trump may be able to shorten this war by intensifying it, but his options to do so would make the war much costlier for the global economy.

Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.

Section: (integrated-futures-initiative) Photo: Ali Hamed Haghdoust

By Henna Moussavi

From more than 4,000 kilometers away, Tehran arrives as a man’s voice heard through a pair of headphones. The speaker, referred to here as Nima, is a civil servant working extended shifts in the middle of an unprecedented aerial bombardment, observing how a city of millions absorbs active conflict and is altered by it.

Internet access in Iran was severed on the first day of the war, and those contacting foreign entities still risk prosecution. Nima used a VPN without certainty it would hold. “I was a bit hesitant,” he says, “mainly because these VPNs aren’t reliable… so I thought I should say this now, and you can listen whenever you’re able.” The recordings reflect a kind of precarity, while the background noise of music and traffic serves as a reminder that life in the city continues.

Walking through a city responding to destruction, he recorded several hours of voice notes during long hours on the job, with the rhythm of someone thinking out loud. His reflections trace fractures in public opinion, the destruction of infrastructure, and the informal systems that emerge to fill gaps left by the state.

Informal Resilience

One of the more striking features of Nima’s testimony is his description of how Tehran residents had to improvise in the absence of functioning state services. “During the Iran-Iraq war, there were clear air raid sirens. People knew when to go to shelters. There was a recognisable system. In this war, that hasn’t really existed,” he explained, as the defence infrastructure that would enable early warning was largely damaged at the outset of the war. In their place, with roots in the 12-Day War in June, an informal system has emerged.

“People themselves have effectively created an informal warning network,” Nima explains. When someone hears fighter jets overhead, they message their contacts, and those contacts message theirs. On domestic platforms—Bale, Eitaa, Soroush, Rubika, or specialised Telegram channels like RahBandoon—people post real-time notices, ensuring that “information spreads quickly between people and across different areas.” A message may warn about jets over northern Isfahan, another about airstrikes Mazandaran, and others with updates from Tehran. While people can still be nervous to confide in and openly message on these public forums, they have been invaluable resources in the absence of better warning systems.

Many users make attempts to infer trajectory and timing based on observation, estimating where a strike might land and how many minutes remain. This has become particularly important due to the evidence that U.S. and Israeli forces have conducted double-tap strikes, putting aid workers and residents trying to help others at severe risk.

A population experienced in navigating institutional failure has learned to replace reliance on state broadcasts with lateral communication, led by an instinct to protect their fellow citizens. “This, to me, is one of the more striking aspects of what’s happening,” Nima said with some pride.

When residential buildings are hit by airstrikes, the damage is rarely limited to a single address. The impacts are felt throughout neighbourhoods, where residents are quite literally left to pick up the pieces. Neighbors are evacuated and belongings need moving from high floors, quickly.

Volunteer groups have appeared to help search and rescue and cleanup efforts. Some volunteer groups are religious, others are secular. Many travelled from other cities to help in Tehran specifically, due to the disproportionate number of strikes in the capital. “This kind of work requires a large amount of manpower, which naturally cannot be fully provided by government administrative structures. “ As they clear glass from stairwells, carry furniture down ten-storey blocks, and pack the remaining possessions of people whose homes have been damaged.

Divided Communities

Beyond these examples of community resilience, Nima is quick to acknowledge the division of perspectives among his friends, family, and colleagues, not just with regards to the conflict, but in confrontation with the Islamic Republic on the whole. He describes three groups.

There are those who support the Islamic Republic and interpret the war as an existential struggle, one that demands loyalty and national unity to sustain their ideological mission of anti-Western and anti-imperial sentiment. There are others who reject the government and, in this case, saw external pressure as a necessary, if uneasy, means of forcing regime change. And then there is a third group, distinct from the latter: individuals who are openly opposed to the Islamic Republic but remain equally resistant to foreign intervention, driven by a deep scepticism that any external power carrying out military action against their country could genuinely be acting in their interest.

As Nima described the situation in Tehran while I followed headlines from afar, it became clear that his observations reflected a kind of equanimity that one achieves through proximity to hardship and devastation.

A defining feature of the third camp is how it recognizes that whatever the outcome of this conflict, whether a ceasefire is upheld or not, ordinary Iranians will bear the cost. They anticipate that, in the aftermath of the war, the Islamic Republic will only emerge more repressive, using the war as justification to tighten control over all aspects of social and political life in Iran. This has become more apparent with continued executions, arrests, and restrictions on internet access and other public freedoms, which have been even more aggressive since 28 February.

The different groups have been visible during the war. “Almost every night there have been gatherings in streets and alleys that would normally be empty, it feels like the whole city is involved,” Nima explains. These gatherings included pro-government rallies and quietly defiant New Year celebrations, where dissent is felt, if not openly expressed. Sometimes dissent was heard, if not seen, as in the case of slogans chanted from apartment buildings, celebrating the death of the Supreme Leader Ali Khamenei.

But in the midst of war, political sentiments became even more complicated. “Even among people who were critical of the government, I heard something quite striking: if they noticed anything suspicious, especially given concerns about internal incidents, they would report it,” Nima explained. “Some people said they had never done such a thing before, but during that period they even called official numbers, like those of the intelligence services, to report suspicious activity.”

Likewise, when U.S. President Donald Trump warned that “an entire civilization” would die if Iran did not yield to U.S. demands, many Iranians were dismayed by the indiscriminate nature of the threat. “There was less visible effort, even rhetorically, to distinguish between the government and the population,” Nima noted.

When imagining Iran’s future, public imagination appears to oscillate between two poles: North Korea, a country home to an entrenched authoritarian regime, and Libya, a country that has collapsed into lawlessness and disorder.

“Overall, there’s a feeling of uncertainty,” he states, “people are trying to adapt, but no one really knows what’s coming.” If understanding Iran’s political trajectory is challenging from afar, Nima’s account suggests that the same uncertainty, disagreement, and contestation persist within the country itself. Even the boundaries between the three camps Nima identified at the outset of the conflict have begun to blur, as ideas and allegiances shift between them and individuals reassess their positions in light of the war’s personal impact on their lives. What emerges is not a singular public mood, but a society negotiating its divisions in real time, under the pressure of conflict.

Wartime Routines

With the way events have unravelled, “many people are pessimistic,” Nima concludes. “They don’t think the aftermath of the war will improve things. Economically, the damage could take years to repair. There’s a general sense that even when it ends, life won’t return to normal quickly.” But he is also able to reflect the spirit Iranians have been able to sustain during the war, laughing to himself as he recalls the moment Tehran’s residents suspected the water might be cut off​​—the first priority for his friends and family was “taking a shower.”

Nima sounds unsure about the ceasefire and the high-level talks between the U.S. and Iran. “It’s not clear how serious or advanced these talks are, or how willing each side is to make concessions. Past experience hasn’t been very encouraging, and there isn’t much public confidence that negotiations will lead to a meaningful agreement.”

In a final voice note recorded in the days after a ceasefire was announced, Nima describes what those last hours of bated breath felt like from inside the city. Trump’s deadline for catastrophic attacks on Iran’s power plants had been extended several times before. Most people assumed it would be extended again. But as the clock moved toward the final cut-off, set for around 3:30 a.m. local time, no announcement was made and the atmosphere shifted.

Roads out of Tehran were congested, with petrol stations surrounded by growing queues. Inside homes, people filled containers with water, charged phones and power banks, and scrambled to buy generators, anticipating a blackout they weren’t sure was coming but couldn’t rule out. There was the expectation of cascading failure. Logically, electricity goes first, then water, then the already-fragile mobile networks, then fuel.

Much of Tehran simply stayed awake. Nima himself fell asleep from exhaustion at some point, but woke to the confirmation that a ceasefire in fact had gone into effect. His account of these delicate moments was palpably nerve-wracking, though he maintained a degree of humor throughout. As Nima described the situation in Tehran while I followed headlines from afar, it became clear that his observations reflected a kind of equanimity that one achieves through proximity to hardship and devastation.

The following day, he recalled, “the atmosphere was strange.” Petrol stations fell quiet and traffic returned. By Friday, coinciding with the end of the Nowruz holiday period as well as the end of the Iranian working week, cars were flowing back into the city. Offices were operating at roughly half capacity. Schools and universities remained closed, running mostly online, but still running.

Nima is not a soldier or politician, but a civil servant going about his life in a city fundamentally altered by the conflict. His voice notes, sent intermittently across 40 days of war, reflect the precarity of the subjects he discusses. “The emptied-out Tehran, which we saw even before the New Year, has regained its energy,” he concludes, his voice calm.

“In a way, this is natural. People need to reopen their businesses and get back to work. The reality is that, over time, even wartime conditions begin to feel routine.”

The subject’s name has been changed to protect his identity.

Henna Moussavi is a reporter for The Wall Street Journal, focusing on Iran. Her writing spans political and cultural coverage of the Middle East, and beyond, and she has previously held editorial roles at the Middle East Institute, the Bourse & Bazaar Foundation, and the Oxford Middle East Review.

Section: (vision-iran-initiative) Photo: IRNA

By Hadi Kahalzadeh

After forty days of war, Iran’s families are returning home under a fragile ceasefire. But the pause in the conflict may not prevent the coming shock to Iran’s economy. As ordinary Iranians confront the destruction of roads, ports, and industrial infrastructure, they are discovering that the war has taken away their jobs, their wages, and, for many, their only means of survival. If this war had a hidden target, it was not Iran’s military power projection; it was the labor market that sustains the livelihoods of ordinary citizens.

War has damaged more than 125,000 residential and civil buildings, including 339 health facilities, 32 universities, and 857 schools, and has directly destroyed over 20,000 industrial units, forcing many related businesses to shut down. In other words, around 20 percent of the country’s production units have been directly damaged. Iran’s ports and transportation systems, which move essential goods and raw materials across the country, have also been heavily damaged. According to some estimates, the war has already cause more than $300 billion worth of damage to civilian infrastructure alone, excluding military facilities. This staggering figure captures only the reconstruction cost, not the wider economic toll.

But war does not just destroy buildings. It breaks economic systems. Supply chains, transport networks, and commercial services have been disrupted, and many firms have suspended operations under the combined pressure of war, inflation, recession, and collapsing demand. What makes this especially striking is the pattern of the damage. The sectors hit hardest by U.S. and Israeli airstrikes represent the core pillars of employment and production: steel, construction, petrochemicals, pharmaceuticals, and retail.

Job Uncertainty

The pattern of attacks on infrastructure suggests that Israel and the United States mapped Iran’s labor market and struck at its core pillars. Among the thousands of destroyed production units, the damage to Iran’s steel sector is especially consequential. A review of Iran’s Labour Force Survey and Manufacturing Industries Survey suggests that steel is a critical input for 42 percent of Iran’s industrial supply chain and underpins activity across manufaturing, including automotive production, and construction. When steel supplies are interrupted, the consequences spread far beyond the plants themselves, rippling through manufacturing, transport, building activity, and the many jobs connected to them.

By my estimate, disruption to steel production and distribution threatens 1.8 million jobs across industrial sectors and 3.8 million jobs tied to construction. The petrochemical and pharmaceutical units, which were also damaged in the war and together account for around 30 percent of Iran’s industrial output, represent another major source of labor-market exposure. Because these sectors supply critical industrial inputs and essential goods, their disruption puts another 1.2 million jobs at risk.

About 10 to 12 million jobs, roughly 50 percent of Iran’s workforce, are now at risk. That does not mean all of those jobs have already disappeared. It means that a very large share of Iranian workers, mostly in the informal sector, now live under the shadow of furloughs or layoffs.

Even firms and sectors that have not been bombed are scaling back amid broader pressure from the war. Faced with recession, liquidity constraints, weak demand, and deep uncertainty about what comes next, many are suspending production, postponing investment, and halting expansion. Inflation has made that shock even harsher. In March, point-to-point inflation reached 72 percent, one of the highest rates since the revolution. The long shutdown caused by the war, combined with falling family incomes and fears of further escalation, has reduced private consumption and depressed demand nationwide. Many small firms had hoped that the end-of-year season and the period around Nowruz would offer a chance to recover income through sales and service activity after earlier closures and lost sales. Instead, many now face insolvency and shutdown.

The effects are especially visible in wholesale and retail trade, which employs 17 percent of Iran’s labor force, or roughly 4.1 million jobs. Taken together, industrial production, construction, wholesale and retail trade account for more than half of total employment in Iran. This does not mean the agricultural sector or other parts of the service economy have been spared. But because internet shutdowns have sharply limited visibility into conditions across regions and occupations, the full extent of labor-market damage remains difficult to measure in real time.

Considering the pattern of attacks, about 10 to 12 million jobs, roughly 50 percent of Iran’s workforce, are now at risk. That does not mean all of those jobs have already disappeared. It means that a very large share of Iranian workers now live under the shadow of furloughs or layoffs.

Even before the 40-Day War, Iran’s labor market was already fragile. Prolonged sanctions, stagflation, and lingering pandemic effects had weakened the country’s capacity to absorb macroeconomic shocks. From March to September 2025, Iran’s economy contracted by 0.5 percent owing to the compounding effects of drought, the April explosion at Shahid Rajaee Port, and the 12-Day War last June, resulting in the loss of 750,000 jobs.

Given the economic situation after the 12-Day War, the labor market is likely to continue to contract. If no further losses occur beyond those recorded since last September, and if only 30 percent of the 10 to 12 million jobs now at risk are eventually lost, Iran could lose approximately 3 to 4 million jobs. This would represent about a 15 percent contraction of the labor market, marking the largest decline in Iran’s modern history.

Difficult Response

The Islamic Republic appears to have planned for a six-month war scenario, including military readiness, the supply of essential goods, and the provision of subsidized loans, tax incentives, and exemptions for damaged production units. The administration has also announced that those who lose their jobs may be eligible for unemployment benefits equal to 55 percent of their wages, or at least the minimum wage. But many employees in the informal sector may not be eligible for benefits, and the financial burden of these commitments appears to exceed Iran’s capacity to meet them.

Providing 3 to 4 million unemployment benefits for six months, for example, would require nearly IRR 5 quadrillion. A 15 percent contraction in the labor market would also mean a 25 to 30 percent drop in revenue for the Social Security Organization, Iran’s largest pension fund. Filling that financing gap would require another IRR of 5 to 6 quadrillion. Altogether, the financial burden of war-induced unemployment would consume at least 20 percent of Iran’s public budget, which is already running a large deficit.

Whether by design or by consequence, this war has struck at the foundations of how Iran’s most vulnerable citizens work, earn, and survive. An estimated 10 to 12 million jobs are now under threat, putting the main source of income for millions of households in both the formal and informal private sectors at risk. And these estimates do not even include the 22 percent of Iranian households that rely on public-sector wages. As so often in war, the highest costs are falling on those least protected by the state welfare benefits.

Even if the ceasefire holds, Iran’s most vulnerable people will suffer the long-term consequences of this 40-day conflict. The bitter irony of this war is that the very population President Trump claimed to support by this war is now bearing the brunt of the damage.

Hadi Kahalzadeh is a welfare economist. He is a non-resident fellow at the Quincy Institute and a research fellow at the Center for Global Development and Sustainability at Brandeis University. Before his academic career, he spent eight years as an economist at Iran’s Social Security Organization, analyzing the impacts of Iran’s economic and social policies.

Section: (vision-iran-initiative) Photo: Ali Hamed Haghdoust

By Sahand Sehatpour

Iran’s capital markets play a far larger role in the economy than is often appreciated from the outside. The Tehran Stock Exchange and the broader capital market today include more than 700 listed companies across more than 50 industries, while more than 50 million Iranians are tied to the market as shareholders or stakeholders through direct equity ownership, pension funds, fixed-income products, and government debt issuance. Around 70 percent of market turnover is driven by individual investors rather than institutions, a much higher retail share than in developed markets, where institutional investors typically account for most trading. This gives the market a broader retail and social footprint.

Over the past two decades, the market has repeatedly shown an ability to absorb shocks, including sanctions, inflation, currency depreciation and episodes of political unrest, while continuing to function as an important mechanism for savings, price discovery and capital formation. The last year, however, has presented a very different and unprecedented test, combining war, market closures, social unrest and direct damage to strategically important listed industries.

The first major disruption to Iran’s capital markets came during the 12-day conflict between Iran and Israel from 13 to 24 June 2025. During that period, the equity market was closed, while fixed-income instruments and fixed-income ETFs resumed trading only after being shut during the first week. Gold-backed ETFs remained suspended throughout.

The equity market reopened quickly on 28 June, soon after the ceasefire took hold. That reflected an important reality: despite the geopolitical shock, there had been little meaningful direct damage to most listed companies. The challenge was therefore less about destruction of earnings capacity and more about a sudden repricing of risk.

That repricing was significant. Investors who had been unable to access liquidity during the closure moved quickly to reduce exposure once the market reopened, while the conflict itself had raised the overall country risk premium. Much of the market opened at the daily down limit. The Capital Market Stabilization Fund intervened to absorb part of the pressure, but the market remained under strain through the end of August.

Overall, TEDPIX declined by roughly 20 percent in local currency terms in the weeks following the war. Because the index is weighted towards larger names, that figure understated the pressure experienced by many smaller and less liquid companies. Meanwhile, the free market USD/IRR exchange rate continued to rise, meaning the market fell by around 35 percent in dollar terms. Total market capitalization dropped to about $80 billion, one of the lowest levels seen in recent years despite several major IPOs since 2019.

Fragile Recovery

Once the immediate post-conflict selling pressure was absorbed, the market began to recover, supported by a combination of currency adjustment and policy change.

Following the snapback of UN sanctions on 27 September, the USD/IRR exchange rate resumed its upward move. In Iran, this has historically been one of the central drivers of equity performance, particularly for exporters, commodity-related businesses and investors seeking a hedge against inflation and currency weakness.

At the same time, the authorities moved away from the multiple exchange-rate system, including NIMA and other official rates that had traded at a substantial discount to the free market rate. These mechanisms had long distorted pricing, foreign-currency allocation, and corporate earnings. For many listed companies, especially exporters and producers linked to the Iran Mercantile Exchange, subsidized exchange rates had effectively meant monetizing revenues below economic reality. Their removal therefore improved transparency and, in many cases, strengthened the earnings outlook.

This became a major catalyst for the market. The TEDPIX index rose by more than 85 percent in the six months following the war and reached a new high near 4.5 million. In dollar terms, however, the rally was much more modest, at roughly 40 percent, and the market still remained below its pre-war level.

The foreign exchange reforms also created pressure elsewhere in the economy. The removal of preferential rates increased the cost of many basic goods and added to inflationary strains. By late December 2025 and early January 2026, protests had emerged in response to deteriorating purchasing power, the weakening rial and the wider economic environment. Although the demonstrations initially appeared limited in scale, they were geographically broad and reflected a deeper build-up of frustration over living standards. What began as economic protest gradually took on a more overtly political character as inflation accelerated and expectations of further hardship grew.

Iran’s authorities then responded with a much harsher crackdown, which materially increased the domestic political risk premium. At the same time, the external dimension became more serious. Donald Trump signaled that a violent response by the Iranian authorities would not be tolerated and warned of possible consequences if the crackdown continued. That raised fears that domestic unrest could evolve into a broader geopolitical confrontation, particularly against the backdrop of regional military build-up.

At the same time, Iran’s risk-free interest rate rose from around 33 percent before the conflict to above 40 percent by January as fiscal and monetary conditions tightened. That was a meaningful headwind for equities. These factors together triggered another leg down in the market. Equities declined by roughly 20 percent in rial terms and around 30 percent in US dollar terms. As a result, measured in dollar terms, the TEDPIX index fell to a level even lower than in the immediate post-war period.

Direct Impacts of War

While Iran’s capital markets were still recovering from the impacts of the 12-Day War and the January protests, a new war began. The market was open on 28 February when the attacks began, but trading was halted and the day’s trades were cancelled. Since then, cash equities and equity derivatives have remained closed. Unlike the previous conflict, however, fixed-income instruments, fixed-income ETFs, and also gold- and silver-backed ETFs have continued to trade. Gold-backed funds have seen outflows of around $60 million, while fixed-income funds have attracted approximately $130 million of retail inflows.

The impact of the war on the capital markets will be substantial. U.S. and Israeli airstrikes have directly targeted major industrial facilities, including those operated by publicly traded companies. In the steel industry, the most important example is Mobarakeh Steel, the country’s largest hot-rolled coil producer. Other affected companies include Khuzestan Steel, Yazd Alloy Steel and Kavir Steel.

The directly affected companies represent more than 15 percent of the combined market capitalization of the Tehran Stock Exchange and the Iran Fara Bourse, the secondary exchange.

In petrochemicals, the larger issue is the damage to three centralized utility providers serving the Mahshahr and Assaluyeh regions: Mobin, Fajr, and Damavand. These utility facilities supply electricity, gas, oxygen, compressed air and other essential services to the surrounding petrochemical complexes. Because Mobin, Fajr, and Damavand have been put out of service, petrochemical plants across Mahshahr and Assaluyeh have also been affected and, in many cases, forced to cut production. Since more than 80 percent of Iran’s petrochemical output is concentrated in those two regions, the damage has disrupted a very large share of the country’s petrochemical production capacity.

At this stage, timelines for repair remain uncertain, though even constructive estimates suggest a multi-year process. There were also companies in other sectors that suffered damage, but steel and petrochemicals are clearly the most significant from both a market and macroeconomic perspective.

The broader economic implications are straightforward. These sectors are among Iran’s leading non-oil export earners, so disruption could reduce export receipts by close to $15 billion, placing additional pressure on the external balance. The impacted facilities also supply feedstock and industrial raw materials to a wide range of downstream industries. Any interruption therefore has second-order effects, either through lower domestic production or higher import dependence.

Careful Reopening

When the equity market next reopens, the process is likely to be more selective and more disclosure-driven than the reopening after June 2025. The directly affected companies represent more than 15 percent of the combined market capitalization of the Tehran Stock Exchange and the Iran Fara Bourse, the secondary exchange. If one includes listed holding companies with substantial exposure to the impacted companies, the effective share may rise to as much as 25 percent of the market.

The Securities and Exchange Organization will likely require operational updates from listed companies before reopening trading, particularly from those that may have been directly or indirectly affected. The market will need visibility on the extent of damage, the status of production, and the expected timetable for returning to more normal operations.

Once trading resumes, the market is likely to split into two very different stories. For companies directly affected by the conflict, a sizable correction is likely. For the broader market, however, the outcome will depend much more on the political and sanctions backdrop than on the conflict alone.

If the current ceasefire ultimately creates a path towards a broader understanding between Iran and the United States, followed by some degree of sanctions relief and reintegration into the global economy, the current dislocation could create a particularly interesting entry point for investors. It is still too early to determine the precise market reaction, but under such a scenario the period around the reopening could prove to be an important opportunity.

If sanctions remain in place, the adjustment is likely to be more demanding. Lost export capacity would weigh on the trade balance and probably push the USD/IRR exchange rate higher, which could support parts of the market in nominal rial terms but would still leave equities under greater pressure in US dollar terms.

Taken together, the events of the past year have left Iran’s capital markets at an unusually important juncture. Much now depends less on valuation alone and more on the political and economic direction from here: a deal could create a broad and meaningful opportunity set across much of the market, whereas in its absence, opportunities are likely to be narrower and more selective against a more negative outlook for the Iranian economy.

Sahand Sehatpour is a portfolio manager at Amtelon Capital focused on Iranian capital markets, with experience across both public and private investments. His work covers listed equities, market structure, and the broader investment environment in Iran.

Section: (vision-iran-initiative) Photo: Amir Ghoorchiani

By Esfandyar Batmanghelidj

Few aspects of the ongoing war have rankled the international community more than the fact that Iran is charging vessels a fee for safe passage through the Strait of Hormuz. Now, Iran has insisted that it will retain “control” of the strait even after the end of the war.

Understanding this demand requires precision about what is meant by “control.” After this war ends, Iran will still be able to threaten to commercial vessels passing through the Persian Gulf. The asymmetric capabilities it has used to project this threat—ballistic missiles, cruise missiles, naval mines, and aerial and naval drones—will remain. There is no credible military solution to eliminate these capabilities, especially considering that even sporadic success striking ships can shift the risk appetite of vessel owners and charterers.

But even if Iran retains the capacity to strike vessels in the Persian Gulf after the war ends, it will not be able to unilaterally impose a toll on maritime traffic passing through the Strait of Hormuz. This is because Iran can only credibly threaten vessels while a war is ongoing. Once a ceasefire is agreed, any decision to strike vessels would constitute a violation of the ceasefire, triggering renewed conflict. In this sense, Iran’s present control of the strait does not reflect its latent capability to strike vessels, but rather its willingness to absorb the costs associated with the retaliation for those strikes. Those costs remain enormous—it is precisely because of the destructive nature of this war that Iran continues to signal an openness to diplomacy.

The notion that Iran will continue to control physically the Strait of Hormuz after the war can be rejected on face. But as governments around the world seek a diplomatic solution to end this war, they should be careful not to reject the Iranian demand for a “Hormuz toll” outright. Iran’s insistence on continued control of the strait is a political condition for a ceasefire, one advanced in light of the bruising reality that Iran failed to deter unprecedented attacks and has at best managed to draw the United States and Israeli into an attritional war. If a ceasefire requires that both Iran and the United States find a way to claim victory in a war with no winners, accommodating political demands in creative ways is tremendously important. Here, the creation of a toll represents a possible technical provision for a deal, one that can help create political buy-in for a ceasefire and follow-on agreement among leaders in Tehran.

To understand the potential utility of a formal toll mechanism, it is important to note the existing precedent for such fees and the possibility that Iranian control of the strait could be non-exclusive, meaning the toll mechanism could include other regional countries.

Turkish Precedent

The Strait of Hormuz is just over 30 kilometers wide at its narrowest point, meaning that it straddles Iranian and Omani territorial waters. Under the United Nations Convention on the Law of the Sea (UNCLOS), the strait must remain open for international shipping. Specifically, Article 26 of the convention specifies that “no charge may be levied upon foreign ships by reason only of their passage through the territorial sea.” In this sense, an Iranian “tollbooth” on the Strait of Hormuz would be inconsistent with international law.

But Article 26 does note that “charges may be levied upon a foreign ship passing through the territorial sea as payment only for specific services rendered to the ship.” This clause has generally been interpreted to mean that countries can charge fees on vessels passing through its territorial waters for services related to navigational safety.

The notion that Iran will continue to control the Strait of Hormuz can be rejected on face. But as governments around the world seek a diplomatic solution to end this war, they should be careful not to reject the Iranian demand for a “Hormuz toll” outright.

Turkiye is one such country. Turkish authorities impose a fee, adjusted every July, for vessels passing between the Black Sea and the Mediterranean. Currently, the fee is just under $6 per net ton of cargo, meaning that a major container ship transiting the Bosporus is likely paying around $200,000 in fees. Turkiye earns around $200 million in such fees annually. The recent increase in fees was justified “in terms of supporting the sustainability of the public services” provided by Turkiye’s Directorate General for Maritime Affairs.

Notably, if an equivalent fee were applied to the much larger VLCC tankers that pass through the Strait of Hormuz, the revenue would total more than $500,000 per vessel. This charge is not orders of magnitude beyond what Iran is currently charging vessels for safe passage through the strait, indicating that commercial operators can reasonably absorb the cost of the proposed toll, even in peacetime.

Turkiye’s original imposition of fees was contested and if either Iran and Oman were to try to unilaterally adopt a similar model there would be significant pushback, especially from the other littoral states of the Persian Gulf. But the international community does accept Iran’s right to charge fees in a context broadly similar to maritime trade—global aviation.

Aviation Parallel

Iran has not ratified UNCLOS, but it is a party to a similar piece of international law, the Convention on International Civil Aviation, also known as the Chicago Convention. In line with this convention, Iran charges overflight fees from global airlines that use its airspace.

Importantly, much like UNCLOS, the Chicago Convention makes clear that charges cannot be levied on aircraft “in respect solely of the right of transit.” However, Article 15 of the convention does allow fees to offset to costs of critical services related to aviation safety, such as maintaining civilian radars to monitor weather, providing air traffic control to manage flight paths, and ensuring adequate emergency response services at airports.

Given the precedent set by the fees Turkiye charges for vessels passing through the Turkish Straits, and the precedent represented by the overflight fees Iran already charges in line with its provision of air traffic control, navigation and safety services, the Iranian demand to formalize a transit surcharge is neither inherently unreasonable or nefarious. The international community has long accepted Iran’s imposition of such fees for use of its airspace and has understood the need to maintain the safety and openness of Iranian airspace for the benefit of international travel and air freight.

Of course, the fact that Iran is able to charge overflight fees does not mean that it is in a position to impose such fees on vessels transiting the Strait of Hormuz. No regional country will agree to exclusive Iranian control over the strait, even if that control takes the bureaucratic form of a payment. To overcome resistance to their political demand, Iranian authorities must accept that the technical implementation of the toll mechanism will only be viable if it reflects a shared control over the strait.

Regional Diplomacy

The formalization of a kind of toll could contribute to the rehabilitation of regional diplomacy after the war. If Iran is to benefit financially from the passage of vessels through the strait, so too should Oman, whose territorial waters encompass the passage. Moreover, the other six countries who shores bound the Persian Gulf should also benefit—it is their trade that underpins the vessel traffic. In this respect, regionalization of a “Hormuz toll” is consistent with the creation of a more integrated region which shares responsibility for the security and safety of maritime trade.

Importantly, there already exists a body that could be repurposed to receive and use the toll revenue in a regional format. Established in 1978, the Regional Organization for the Protection of the Marine Environment (ROPME) is the only active regional body that includes all eight littoral states of the Persian Gulf. While mainly focused on environmental issues, rather than maritime safety, the organization has successfully coordinated regional responses to maritime emergencies, such as oil spills.

ROPME is long overdue revitalization, especially as climate pressures accelerate degradation of the Persian Gulf’s fragile ecosystems. In an analysis for the Bourse & Bazaar Foundation published last year, Javad Amin-Mansour and Mohammad Al-Saidi noted that “ROPME requires stronger technical capacity, enhanced decision-making structures, and sustained political and financial backing from its members.” The financial boost from a modest fee could revitalize this body, allow it to expand its remit to providing a wider range of environmental and safety-related services in the Persian Gulf and Gulf of Oman. Given the environmental impact of American attacks on Iranian naval ships and Iranian attacks on commercial vessels, the use of toll revenues to remediate the damage of war represents a genuine need.

Establishing a durable peace after this war will require creative thinking. All of the parties involved in the conflict will make political demands. Those demands should be viewed as openings, not dealbreakers, especially when they can be connected to potential technical provisions for a diplomatic agreement.

If the Iranian demand to maintain control of the Strait of Hormuz can be translated into a specific toll mechanism, which can in turn be regionalized and connected to the shared task of rebuilding in the wake of the war, it may prove a valuable opening to create a more integrated and equitable region.

Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.

Section: (integrated-futures-initiative) Photo: Canva

By Zeynab Malakouti and Mohammad Eslami

It appears we are on the verge of a new phase in the U.S.-Israeli war against Iran—one that could include ground troops deployed to Iranian islands or nuclear sites. Yet, with the war entering its second month, voices inside the U.S. administration, as well as regional and international leaders, are calling for negotiations. The Iran war is likely to end only when all parties can present the outcome as a form of victory. In this sense, a settlement will require that the parties in the conflict make reasonable concessions that can be viewed as “achievements” for the other side.

What is needed is a “win-win” outcome, or, more precisely, a situation in which neither the U.S. nor Iran is cast as a loser. Therefore, it is necessary to facilitate genuine diplomacy, rather than the maximalist approaches that would make a resolution far more difficult. Such a framework would need to differ from the recent failed attempts, both the Joint Comprehensive Plan of Action (JCPOA) and the diplomatic process of the past year which ended in Geneva talks just prior to the current war.

Underlying any serious discussion of a durable diplomatic settlement is a reality that military power alone cannot alter: the core disputes between Iran, the U.S., and Israel have no sustainable military resolution. Military operations, however precise or overwhelming, incur unacceptable costs and casualties while leaving the fundamental grievances unresolved. In the absence of a diplomatic framework, the cycle of escalation will inevitably continue.

Solving the Nuclear Dilemma

Even though President Donald Trump previously claimed, following the 12-Day War, that Iran’s nuclear capabilities had been “obliterated,” recent strikes on nuclear sites suggest that this was not entirely the case. For the U.S. and Israel, a central objective continues to be the complete dismantlement of Iran’s nuclear program.

It is unclear if Iran’s new Supreme Leader, Ayatollah Mojtaba Khamenei, will continue to adhere to the fatwa issued by his father, Ayatollah Ali Khamenei, which prohibits nuclear weapons. But if this position is stated clearly, if monitoring and verification return, and if Iran is granted the right to maintain a peaceful civilian nuclear program under strict limitations, a compromise can be found.

In practice, although Iran possesses the technical expertise, most of its key nuclear facilities have been targeted or degraded. These include important sites such as in Natanz, Isfahan, and Fordow, as well as the yellowcake production facility in Ardakan, which processes uranium ore in the early stages of the fuel cycle, and the heavy-water reactor in Arak.

A potential agreement could involve the destruction or strict limitation of key nuclear facilities, along with a decision regarding Iran’s stockpile of enriched uranium, estimated at around 400 kilograms, which could be transferred, reduced, or placed under international supervision. In such a scenario, the U.S. and Israel could declare victory by claiming that Iran’s nuclear program has been effectively neutralized.

On the other hand, Iran’s insistence on maintaining its right to research, produce, and use nuclear energy for peaceful purposes under Article IV of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) is politically significant for domestic audiences, as the state has spent over two decades and billions of dollars to frame nuclear energy as a sovereign right of the Iranian people. Recently, a fast-track bill has been proposed in the parliament, including three key measures: withdrawal from the NPT, the repeal of legislation governing Iran’s commitments under the nuclear deal, and support for a new international framework with aligned countries for the development of peaceful nuclear technology. If adopted, this would signal that a future agreement is unlikely in practice, as Iran may be moving toward a policy that keeps the option of nuclear weapons open.

The foundational premise of any diplomatic settlement in this war is that the Trump administration must come to terms with a reality that has long been evident: the decades-old nuclear dispute with Iran has no military solution.

However, the underlying concern persists; the issue of uranium enrichment itself. Iran retains the technical capacity to increase enrichment levels if it perceives an existential threat. Consequently, Americans and Israelis are aware that allowing Iran to maintain uranium enrichment at levels of 3–5 percent for civilian purposes could facilitate a relatively rapid escalation to higher enrichment levels.

One possible solution would be the establishment of a multinational uranium enrichment consortium under the supervision of the International Atomic Energy Agency (IAEA), involving Saudi Arabia, the United Arab Emirates, and European countries. However, a key point of contention is that Iran has insisted on hosting such a consortium within its territory, while others might strongly oppose this option. But given that the destruction of uranium enrichment facilities during the 12-Day War and the recent conflict has been extensive, Iran could accept a middle-ground approach, whereby the uranium enrichment cycle and nuclear fuel production are geographically distributed across the region, rather than concentrated within a single state.

In this scenario, the further repudiation of nuclear ambitions could reduce the perception of an existential threat and create space for more stable regional relations. However, Iran’s relations with the countries of the Gulf Cooperation Council require significant revision and rebuilding, as the current war shows that, for the moment, Iran is perceived as a profound threat by its Arab neighbors.

The foundational premise of any diplomatic settlement in this war is that the Trump administration must come to terms with a reality that has long been evident: the decades-old nuclear dispute with Iran has no military solution.

Sanctions Relief

If a minimal agreement were reached on Iran’s nuclear program, the primary demand on the Iranian side would be the lifting of sanctions. The maximalist approach, as reflected in the 15-point US proposal reportedly shared with Iran, suggests that if U.S. demands are fully met, the outcome would be comprehensive sanctions relief. However, this proposal has been rejected by Iran. More pragmatically, defining the minimum requirements for both sides is therefore essential to reaching an agreement. If the U.S. fails to extract maximal concessions from Iran, any sanctions relief would likely need to remain partial and exclude measures related to human rights violations and support for terrorism. In this context, relief could initially take the form of limited measures, such as waivers for the purchase of Iranian oil, as occurred during the war when the US waived sanctions on Iranian oil purchases at sea for 30 days, or controlled access to frozen assets, particularly for the reconstruction of the energy sector.

For Iran, especially in the aftermath of the war and given the scale of destruction, the situation is different. Although military strikes have significantly degraded Iran’s nuclear infrastructure, Iran has not entirely lost its bargaining leverage, as it retains technical expertise, residual capabilities, and a stockpile of approximately 400 kilograms of enriched uranium, the status and location of which remain uncertain. If Iran were to concede this remaining leverage—namely, its nuclear program and enrichment capacity—it would require sanctions relief substantial enough to generate meaningful economic recovery. This would be necessary not only for rebuilding its economic infrastructure, but also for demonstrating domestically that the costs of war and nuclear concessions have resulted in a fair and equitable outcome, namely, the preservation of a peaceful nuclear program alongside the lifting of sanctions. However, the perceived level of fairness will ultimately depend on several factors, such as whether sanctions relief is partial or comprehensive, and the outcome of the war

Regarding sanctions relief, several key dimensions require further analysis, including the sectors targeted, the duration of relief, and whether primary and secondary sanctions are included. These elements depend on two critical factors, which are not clear at this moment: first, how the war ends; and second, the extent to which Iran’s economic capacity contributes to the survival of the Islamic Republic, particularly in maintaining domestic stability and sustaining elite and societal support.

For European stakeholders, this suggests a strategic choice. Instruments such as the snapback mechanism confer influence primarily in moments of confrontation, not in periods of stability. This was evident in October 2025, when all previously lifted UN sanctions on Iran under six UN Security Council resolutions were reimposed through the snapback mechanism following a decision by France, Germany, and the United Kingdom.

If the United Kingdom, France, and their European partners seek to play a constructive role in a post-conflict order, they must be prepared to relinquish tools designed for pressure in favor of those designed for peace. The greater strategic reward lies not in preserving leverage for the next crisis, but in helping to build a settlement that makes such crises obsolete. In this context, Iran’s experience with the snapback mechanism is likely to make it strongly resistant to the inclusion of any comparable automatic enforcement mechanism in future agreements.

Range Limits

The missile program remains one of the most challenging aspects of any potential agreement. Iran has consistently stated that its missile capabilities are non-negotiable and remain off the table. In practice, since the early 2000s, missiles have been Iran’s primary area of military investment. This war has reinforced Iran’s perceptions. Iran’s air defense systems have shown clear limitations, meaning that, in military terms, Iran relies heavily on missiles and relatively low-cost drones for deterrence, self-defense, and offense.

From Iran’s perspective, any substantial reduction in its missile capabilities—whether in terms of quantity or range—would directly increase its vulnerability in future conflicts. As a result, this is an area where Tehran is unlikely to make major concessions. Without some form of accommodation on this issue, reaching a comprehensive agreement will remain extremely difficult.

Yet, if a realistic compromise is to be found, it must begin with an honest assessment of Iranian threat perceptions. The range of missiles Iran develops is not arbitrary; it is shaped by the distance of the threats Tehran perceives. If Iran chooses to escalate, two broad trajectories are conceivable after the war: Iran could choose to expand its missile capabilities toward a range of 4,000 kilometers or push further to 7,000 kilometers. What it will most likely not do, however, is abandon its shorter-range 2,000-kilometer missiles, and it is unlikely for it to negotiate the size of its stockpile.

That said, Iran may be open to restraint on longer-range development, depending on how it assesses the posture of European powers. The calculus is straightforward: the more Europe distances itself from direct collaboration with the U.S. and Israel in the current conflict, and the more it uses its leverage at the UN Security Council to facilitate sanctions relief and endorse a resolution that could serve as a political guarantee for a non-aggression framework, the more Tehran may be willing to cap its missile range at 2,000 kilometers.

None of these elements exist in isolation. The missile issue, the nuclear file, sanctions relief, and the future security architecture in the Strait of Hormuz are all tightly interlinked. Iran will approach them as a single, interconnected package. If Europe plays a constructive role—both in securing a ceasefire and in shaping a post-war security structure—it may find that Tehran is prepared to trade long-range missile ambition for strategic reassurance. Without such guarantees, however, the incentive to expand range and capability will only grow.

Opening the Strait

The Strait of Hormuz is will emerge as a central issue in any negotiations, largely because its strategic importance had long been underestimated. In a conflict of the scale launched by the U.S. and Israel, military force alone is not decisive; states also rely on geographic and economic leverage to avoid defeat. For Iran, the Strait precisely represents such leverage. Its ability to influence—and, at critical moments, potentially control—this narrow waterway is a significant strategic asset.

By imposing restrictions on maritime traffic through the projection of threat, Iran can impact global supply chains extending far beyond energy, and touching food production and semiconductor industries, thereby internationalizing the conflict. If Tehran maintains sustained pressure in the Strait, it can prevent the war from settling into a prolonged stalemate of the kind seen in other conflicts, such as Ukraine. For this reason, Iran is likely to increase its investment in securing and projecting power in the area, whether through transit regulations or other forms of oversight.

For the US and Israel, by contrast, the Strait is a critical vulnerability, particularly in their global relations. Both are therefore likely to prioritize maintaining freedom of navigation and limiting Iran’s ability to exert control over this global chokepoint.

A realistic, win-win approach to this dilemma would require Iran to offer a new framework for the Strait of Hormuz—one that reflects the reality that the waterway must remain international.

For instance, one proposal is to establish a joint Oman–Iran mechanism to operate a formal tollbooth. In practice, Iran has already begun to impose transit fees analogous to those Egypt collects for passage through the Suez Canal, and it is likely to continue doing so. Key nations—including China, Russia, Iraq, Turkey, Thailand, Pakistan, and India—have already secured passage.

The strategic choice would be between engaging in a prolonged conflict with Iran or securing economic stability and addressing the energy insecurity caused by closure of the Strait. In this scenario, affected countries must weigh which option better serves their interests. An alternative scenario would be for Iran to accept the principle of freedom of navigation in the Strait of Hormuz, while retaining primary responsibility for the security of the Strait as a form of deterrence against potential threats.

Ultimately, military force is no more viable a solution to the closure of the Strait of Hormuz that to other issues complicated relations between the U.S. and Iran. The risks of a military operation—strategic, tactical, logistical, technical, and human—are immense and defy easy calculation. Inside the White House and the Pentagon, ideas are circulating about a ground invasion of Kharg Island, Abu Musa, the Greater Tonb and Lesser Tonb as well as and other Iranian islands—a move that would bring bloodshed to all sides. However, the most significant risk is political: an operation of this kind would close the window for both Trump and Iran to claim victory and extricate themselves from a potentially endless war.

Overturning the Old Order

As Antonio Gramsci once wrote, “the old is dying and the new cannot be born.” This is precisely the condition of the Persian Gulf today. The American-led security order that once anchored the region is collapsing, but no viable alternative has yet emerged to take its place. In this interregnum—this void between orders—a great variety of morbid symptoms appear: reckless wars, shifting allegiances such as the relations between the U.S. with the EU, the UK, and the NATO, and a dangerous vacuum.

Yet committing to diplomacy requires acknowledging that when you overturn the old order, a new one will inevitably take its place—whether by design or by default. The question is not whether a new order will emerge, but whether it will be born out of continued conflict or constructed through mutual agreement. However, any emerging order must remain firmly grounded in international law, with consistent respect for core principles such as bona fides, non-intervention, and the prohibition of the use of force.

The U.S. is locked in an attritional war. So far, Iran has demonstrated its ability to withstand sustained military pressure and retains the capacity to generate regional instability by targeting U.S. interests and leveraging its influence over the Strait of Hormuz. This, in turn, enables Iran to exert pressure on global energy markets, contributing to higher oil and gas prices and creating broader energy insecurity from Europe to Asia. Depending on how the war ends, Iran’s relations with key stakeholders will require revision and rebuilding.

Considering all the challenges outlined above, one thing remains clear: where there’s a will, there’s a way. If President Trump truly wants to stop the war he set in motion—a war that has created chaos for allies across the Middle East, Europe, and Asia—the door is always open for talks. But the deployment of roughly 17,000 troops to the region suggests that Trump is not yet serious about committing to diplomacy. For now, he is continuing to put lives and livelihoods at risk.

Zeynab Malakouti is a Senior Fellow at the Global Peace Institute and a Research Affiliate at the Middle East Institute, National University of Singapore.

Mohammad Eslami is a PhD Candidate and Research Fellow at the University of Tehran. He is a co-author of The Second Europe, a study of Iranian-European nuclear negotiations and was formerly editor-in-chief of Khorasan Diplomatic Magazine, traveling regularly with Iranian negotiators during the nuclear talks.

Section: (vision-iran-initiative) Photo: WANA

By Mehran Haghirian

“Death to the dictator,” “This is the final battle,” and “Long live the king,” are the slogans Iranians have been shouting in the streets since December. They have returned to the streets in force, with the protests on January 8 involving enormous crowds around the country. While the latest wave of demonstrations began in the bazaars in response to the sharp devaluation of the national currency, these are not merely economic protests. Iranians are exhausted by a deepening impasse across political, social, environmental, and economic spheres, with crises compounding by the day. Under the status quo, the regime, the government, and society as a whole have proven incapable of resolving any of these challenges, leaving lives interrrupted and livelihoods diminished.

The Islamic Republic’s veneer of invincibility was repeatedly shattered during 2025 and continues to break in 2026. For the first time since the end of the Iran–Iraq War in 1988, missiles struck Tehran and cities across Iran during the twelve-day war between Israel and Iran in June. Ever since, the U.S. president has repeatedly threatened action against the country. One of the core bargains the Islamic Republic offered in exchange authoritarian rule after the end of the Iran-Iraq War—that it could shield Iran from further conflict—has collapsed. Its strategies, investments, slogans, and its so-called Axis of Resistance have unraveled alongside its nuclear ambitions. From Syria to Lebanon, Palestine to Yemen, and as far as Venezuela, the regime’s purported allies are either dead, exiled, or imprisoned. The Islamic Republic has reached an impasse. It now waits only for the departure of one man: Ali Khamenei.

Locked and Loaded

In the early days of these protests, Donald Trump declared that the United States was “locked and loaded” and would come to the “rescue” of protesters should the regime violently suppress them. Trump’s intervention reflects the priority Iran has assumed in his foreign policy agenda and the opportunity he sees in making history as the president who could end Iran’s impasse after more than four decades. His messages followed a year of contradictory signaling: a preference for negotiations in the spring, calls for “unconditional surrender” during the June war, and renewed openness to talks in December. Strategic or not, these inconsistencies intensified pressure on the decision-making calculus of regime officials, further destabilizing an already brittle system.

For Trump, the Iran file is unresolved. The fate of enriched uranium and the future of the nuclear program remain pressing concerns. The Iranian nuclear issue—one of the most consequential global challenges of the past two decades—still requires a comprehensive agreement, with or without the Islamic Republic. Trump appears unwilling to allow the issue to linger for much longer.

Despite mounting losses, Khamenei has remained defiant, vowing never to negotiate with the United States. In doing so, he has chosen to sacrifice any last shreds of legitimacy. But Khamenei’s decision to hide in a bunker as Israeli missiles struck the country above him in June was more than symbolic. His political isolation—cornered by arch enemies in Washington and Tel Aviv—is equally consequential. What is unfolding is not merely the humiliation of a man who ruled through repression and archaic fantasies, but the embarrassment of a system that claimed to defend Iran’s independence and dignity while crushing the hopes, aspirations, and futures of its people. Those who justified decades of brutality in the name of sovereignty and deterrence now have nothing left to offer. The events of the past year have pierced the foundational myths of the Islamic Republic.

Scenarios for Change

Iran has reached a moment that generations imagined but never believed would arrive. For decades, Iranians were divided into competing camps—monarchists, reformists, abolitionists, loyalists—yet largely united by a shared sense of patriotic nationalism. Inside the country and across the diaspora, demands often contradicted one another. Some pushed for democracy from the early post-revolutionary years and more forcefully after the 2009 Green Movement. Some called for sanctions, others fought to lift them. Some opposed the 2015 nuclear agreement, others defended it. Some marched against war, others called for targeted strikes. Even the national flag—and the notion of rallying around it—became contested, with some rejecting the regime’s symbols and others embracing ancient ones.

These divisions often drowned out a shared longing for a free Iran because regime collapse seemed impossible. That assumption no longer holds. Given the pace of developments inside Iran and globally, the country has entered the realm of the previously unimaginable. For the first time, Iranians at home and abroad are moving beyond articulating what they reject toward debating what must come next.

To avoid a historic betrayal of the Iranian people, Trump and Netanyahu now carry the burden of their own promises: that they seek to support and rescue the people of Iran, not to destroy the country but to see it flourish.

A political transition is now inevitable, though its form remains uncertain. The central questions of the transitional period are unavoidable: who will lead it, how the military will be unified, when a referendum will take place, and who will contest elections. These are monumental challenges, inseparable from any credible path toward a free, secular, and independent Iran.

Some view a renewed agreement between Trump and the regime as possible, however small the probability; such a deal would nonetheless trigger significant internal change. Another possibility is the regime’s survival beyond Khamenei and the elevation of figures such as Hassan Khomeini or Hassan Rouhani. Yet this outcome, too, would mark irreversible transformation. Incremental reform within a theological system fundamentally disconnected from society has reached its limits.

A third—and more likely—scenario is a takeover by the Revolutionary Guards, a path that could lead to war with the United States and Israel, or result in a political bargain for their survival that would dramatically change Iran’s foreign policy and security doctrine. Over decades, segments of society repeatedly engaged the system—through elections, reformist platforms, and tactical participation—in the hope of averting hardline consolidation. Those efforts failed. The regime was never structurally accountable and grew more distant from ordinary Iranians’ aspirations. Supporting the protesters today therefore requires acknowledging their central demand: the end of the Islamic Republic and its theocratic rule. While Khamenei’s death appears a prerequisite for any scenario to advance, all actors are already positioning themselves for that moment, including the Revolutionary Guard.

A fourth scenario has therefore gained momentum—one that moves beyond the regime altogether. Rather than emerging from negotiations, succession, or military takeover, this path centers on a transition initiated outside the Islamic Republic’s institutional framework. Since December, this possibility has shifted from abstraction to political reality. Leadership of the transition has become central, not as a matter of preference, but of necessity. Many capable figures remain unknown to the public, denied any platform to speak to their compatriots. Numerous political prisoners, exiled activists, and professionals have long prepared to serve their country. Among those widely recognized, Reza Pahlavi remains polarizing yet singular. For some, he represents an autocratic past; for many, he has come to symbolize a rupture with the present system. In an environment where institutional opposition is banned and leadership absent, legitimacy has shifted to the streets—and no alternative figure commands comparable recognition. State-controlled media failed to persuade post-revolutionary generations, while satellite networks and online platforms revived memories of pre-1979 Iran, reshaping public perception. Millions have consumed cable-quality programming highlighting the successes, progress, and modernity of the Pahlavi period on a daily basis for the past decade, if not longer.

Opposition to Reza Pahlavi largely reflects resistance to the idea of monarchy itself rather than to him personally, though some cite contested actions, including his meeting with Benjamin Netanyahu. While a core group of his supporters seek coronation, Pahlavi has repeatedly rejected that role. He has stated that he seeks to lead a transitional process, not return as monarch, arguing that ceremonial kingship would silence him politically. What is instead proposed is a transitional period of twenty-four to thirty-six months, during which a decision council is established, a constitutional committee formed, political parties legalized, civil society revived, independent national media emerge, and urgent economic and environmental challenges addressed. Pahlavi remains the most widely recognized Iranian figure who has openly expressed interest in leading such a process. Other imprisoned figures, such as Nobel Peace Prize laureate Narges Mohammadi and former parliamentarian Mostafa Tajzadeh, also have significant support and will be active players in any political transition.

Iran’s capacity for a smooth transition rests on institutional foundations, many of which predate the Islamic Republic. Core institutions remain largely apolitical and resilient, preventing the collapse of public services. Iran is not lacking in human capital. Millions of professionals inside the country can and will rebuild it.

Iran is not Iraq, Libya, or Syria, but it faces comparable risks. Secessionist movements on its periphery—from Kurdish and Azeri groups to the Ahwazi movement and Jaish al-Adl—pose serious challenges. These threats are compounded by instability beyond Iran’s borders, including by the Taliban and the Islamic State, as well as the influence of major powers such as Russia, China, Israel, and the United States. The violation of Iran’s sovereignty by Israeli and U.S. strikes must not be obscured. Framing those attacks as targeting the regime and its officials was crucial in minimizing their impact on Iran as a state. Nonetheless, innocent lives were lost and civilian infrastructure was targeted. Any further escalation would endanger Iran’s territorial integrity and undermine the legitimacy of any future government.

To avoid a historic betrayal of the Iranian people, Trump and Netanyahu now carry the burden of their own promises: that they seek to support and rescue the people of Iran, not to destroy the country but to see it flourish. U.S. efforts must therefore include protecting Iran’s sovereignty and territorial integrity during a fragile transition. Territory—the map of Iran—is sacred to Iranians. No Iranian, regardless of political orientation, would accept the loss of a single inch of land. A future government will be responsible for safeguarding sovereignty while reintegrating Iran into the international community with dignity.

The Islamic Republic is over, at least as a political force. The greatest danger now is not collapse itself, but the failure to protect the transition from forces—internal and external—that would prefer chaos to a sovereign, democratic Iran.

Dr. Mehran Haghirian is the Director of Research and Programmes at the Bourse & Bazaar Foundation. His work centers on conflict resolution and diplomacy, with a particular focus on the Persian Gulf region. Haghirian holds a PhD in Gulf Studies from Qatar University and a master’s degree in International Affairs from American University’s School of International Service in Washington, D.C.

Section: (vision-iran-initiative) Photo: IRNA

By Esfandyar Batmanghelidj

Economic inequality is the single most important issue in Iran. All of the country’s political and social ills pour forth from the crucible of inequality. A successful political transition in Iran requires more than just identifying problems, it requires a positive vision for Iran and solutions to the country’s problems. But no opposition leader, whether inside or outside of the country, has managed to explain how they will deliver economic justice in Iran. Until such a positive vision emerges, there is nothing for protestors to rally around but slogans and a shared expression of anger.

To their credit, Reza Pahlavi and his boosters have done some work to set out their vision for Iran’s transition. There is a lot to say about their vision, including the striking level of institutional continuity even they are willing to accept were they to inherit the state structures of the Islamic Republic. But the critical flaw of their plan is a stunning failure to address the issue of inequality.

In the six papers on “Economic and Social Stabilization” published by NUFDI and endorsed by Pahlavi, there is barely any examination of inequality. In fact, across the reports, which total 164 pages, the word “inequality” appears only once. This is an extraordinary blind spot and it points to a failure to see the political conditions in Iran for what they really are.

Most critics of the Islamic Republic falsely believe that the reason the country has struggled economically is because of the role of state ownership in the economy and the creation of a bloated welfare system that represents a kind of Islamic socialism. They believe that economic reforms in Iran require cutting red tape, respect for private property, reliance on market mechanisms, and fiscal discipline. In other words, they are calling for classic neoliberal interventions. But these are precisely the reforms that have been attempted by the economic policymakers of the Islamic Republic for nearly three decades, spearheaded by economists who were trained in the United States and United Kingdom to worship the likes of Friedman and Mankiw.

The reason these reforms have failed is not because the Islamic Republic did not understand neoliberalism, the reason is that the Islamic Republic applied neoliberal ideas in an environment where they were prone to abuse. Iran’s current leaders basically undertook their own version of shock therapy, which raised living standards from the early 1990s to the mid-2000s but did so in a manner that concentrated purchasing power among a small elite (see the chart below from Djavad Salehi-Isfahani, which uses data from Iran’s Household Expenditures and Income Survey).

At the same time, across multiple administrations, the economic program eroded the authority of the administrative state in ways that allowed economic elites to put their interests above those of the rest of society. There was no effort to rein in rampant financialization and speculation, no organized industrial policy, no protection of welfare spending. The state relied on economic growth to forestall social tensions. But the rich wanted a bigger piece of the pie and the state did not stop them from grabbing it, even when the pie ceased growing under sanctions. Social provision in Iran remains intact, but its structures are groaning under the weight of these economic contradictions.

In the 2023 wave of the Arzesha-ha va Negaresh-ha Iranian (“Values and Attitudes of Iranians”) survey, a robust nationally representative poll fielded by Iran’s Ministry of Culture, respondents were asked “Do you think the gap between the rich and the poor has widened or narrowed compared to five years ago?” A significant 88 percent of respondents reported that the gap had widened. Moreover, 78 percent of respondents agreed with the statement that “In our society, the rich get richer every day, and the poor get poorer.”

In light of these sentiments, why don’t people like Pahlavi address the issue of inequality? A few reasons come to mind. First, a political opposition rooted in the deeply unequal United States, boosted by prominent Republicans, and supported by a wealthy diaspora who like low taxes, small government, and want to “Make Iran Great Again,” is probably ideologically incapable of addressing the issue of inequality in Iran.

Second, even if there is some ambient awareness of the problem of inequality, there may tactical considerations. In the immediate future, the Pahlavi camp’s best hope for “revolution” relies on elite defections, given the repeated failure of protests to reach a critical mass. Understandably, if you want economic elites to get on board with your political program, you are not going to talk about real class politics.

Finally, any true reckoning with the issue of inequality would reveal uncomfortable truths, including the fact that exacerbating inequality was an intentional aim of U.S. sanctions policies, which were callously endorsed by the diaspora. Iranians were made poorer so they would become angrier. With one hand tied behind their backs by the Islamic Republic, and another hand tied by the United States, they were pit against the rich, who have remained out of reach in their proliferating office towers and hilltop villas. This has been its own injustice.

One reason I do not believe we have arrived at a decisive moment in Iran’s political transition, let alone a moment of revolution, is that we are not even talking about the stakes in Iran using the right language and we have yet to envision a transition that deals with the main grievances in the country. We are still in the process of clarifying the stakes and identifying solutions.

As we make progress towards some kind of fundamental political change in Iran—I strongly believe progress is being made—it is important to recognize that Iranians are not seeking a political revolution, they are seeking a social revolution. Alongside their political rights, Iranians are demanding economic opportunity and social dignity. In this context, a democratic transition without economic redistribution will achieve nothing—it will not be able to consolidate.

The reason the political project of the Islamic Republic has failed is because of the failure to redistribute wealth successfully and sustainably, especially as sanctions stymied growth. Most economies around the world are breaking with the neoliberal consensus. Iran should do the same and pursue state-led investment to drive productivity growth, renew the commitment to social welfare to reduce economic precarity, and ensure purchasing power is spread across the income distribution more equitably.

The uncomfortable reality is that the drivers of today’s protests today are the same as those behind the protests in 1978-1979. The political economy of the Pahlavi Monarchy and Islamic Republic are strikingly similar—two systems that accumulate wealth for the rich through forms of renterism and economic repression. We all know a democratic system will be better for Iran, but what economic system will break this cycle that pits the weakened poor against the strengthened rich? Until we answer that question, there will be no successful political transition, even if the Islamic Republic is pushed over the edge.

Section: (vision-iran-initiative) Photo: IRNA

By Barzin Jafartash Amiri

The confirmation of Seyed Ali Madanizadeh as Iran’s new Minister of Economy comes at a pivotal moment. For decades, Iran has struggled under the weight of economic sanctions and chronic internal mismanagement, which have eroded its institutions and stifled growth. Now Iran finds itself in the opening stages of what could prove a long war with Israel. Iran’s new economy minister faces unprecedented challenges.

At 42, Madanizadeh embodies a new generation of post-revolution technocrats—professionals who are not tethered to political factions. His academic pedigree is exceptional. He began his ascent by winning a bronze medal at the 2000 International Mathematical Olympiad. He then earned a degree in Electronic Engineering from Iran’s prestigious Sharif University. He went on to earn a master’s in Applied Mathematics from Stanford University in 2007 and a PhD in Economics from the University of Chicago in 2013. Most recently, he served as an Associate Professor of Economics at Sharif University of Technology and Dean of its School of Management and Economics. His nomination raises a pressing question: can a technocrat steer Iran’s battered economy through an unexpected war?

What distinguishes Madanizadeh, beyond his credentials, is his capacity to bridge Iran’s deep political divides. Despite his Western education and lack of political affiliation, he enjoys rare respect across the political spectrum. His religious background, combined with a reputation for competence and integrity, makes him a unifying figure in a polarized political landscape—a role he could leverage to manage Iran’s economy in wartime while pushing through long-stalled reforms.

Madanizadeh is well-versed in Iran’s economic challenges. As a pragmatic economist, he has spent years analyzing the domestic economy and advising state bodies. His key priorities—curbing the budget deficit and reforming the banking sector—are two of Iran’s most entrenched structural problems. Having contributed to legislative efforts, including by drafting banking laws, Madanizadeh is well-equipped to rein in underperforming banks, particularly private ones such as Ayandeh Bank and Bank Pasargad. A government-led restructuring of these banks could help restore financial stability. However, this would demand not just technical skill but also political determination.

One of the thorniest issues for Iranian economic policymakers is the multi-tiered exchange rate system. By subsidizing imports to ostensibly preserve consumer purchasing power, it penalizes exporters, who are required to sell foreign currency earnings at below-market rates in the NIMA system. Reforming this system will provoke resistance from vested interests. But if Madanizadeh can mobilize support for his plan, he could make headway where his predecessors have failed.

Madanizadeh has proposed a phased shift away from broad, indirect subsidies toward a more targeted welfare model. Central to his plan is the reallocation of state support. Rather than subsidizing goods and services, financial assistance would be directed to individuals through a more transparent and organized welfare system. To ease the transition, he suggests launching a package of compensatory cash transfers and a coordinated public awareness campaign. If implemented effectively, this reform could ease the fiscal burden on the government, which currently devotes a large share of GDP to inefficient subsidies.

But fiscal and monetary reforms will not suffice. Madanizadeh must also confront harmful government interventions, chief among them rigid price controls. The automobile industry is a case in point: populist price policies have turned once-profitable car manufacturers into loss-making firms within a highly protected market. Rolling back such distortions while Iran remains under sanctions is politically risky, but necessary. Madanizadeh’s strategy, outlined in the economic plan he submitted to parliament ahead of his confirmation vote, calls for a shift from import substitution to export promotion—a significant departure from Iran’s historically insular economic model. The war will prevent him from pursuing this strategy in the short-term, but Madanizadeh’s proposal suggests he is prepared to challenge the orthodoxies of Iranian economic policymaking.

Madanizadeh’s overall approach to economic reform is rooted in pragmatism and incremental change. On a recent episode of Sekke, a popular Iranian economics podcast, he explicitly rejected radical free-market experiments, advocating instead for gradual reforms to avoid the destabilizing effects of economic shock therapy. With Iran’s subsidies on energy and basic goods reaching unsustainable levels, a gradual approach to reforms may prove wise as Iran faces the destabilising effects of Israeli attacks.

On sanctions, Madanizadeh has adopted a nuanced and politically astute position. While he publicly supported the nuclear negotiations and the pursuit of sanctions relief, he argues in his published plan that the economy must be prepared for the possibility of sustained sanctions and continued isolation should negotiations fail. His approach resonated with conservative factions, who are skeptical of US intentions and doubtful that sanctions will ever be lifted. Madanizadeh was confirmed with 171 votes from a total count of 246 parliamentarians.

Madanizadeh’s confirmation is also symbolic for Iran’s youth. As a highly educated, politically unaffiliated figure, his appointment represents a break from the dominance of the first-generation revolutionaries. For the youth cohort often sidelined from senior positions, his appointment offers a rare sense of inclusion and possibility. If he succeeds, his tenure could mark the beginning of a broader bureaucratic shift—one that values technocratic merit over ideological loyalties. By strengthening ties between Sharif University and government bodies, Madanizadeh could help reverse the brain drain and give Iran’s brightest minds a reason to enter public service.

Madanizadeh’s ties to the Iranian diaspora and emphasis on technology, startups, and the “smart economy” are especially significant. This recalls the early Rouhani presidency, when optimism surrounding the JCPOA and the outreach of some cabinet members to the diaspora encouraged a wave of returnees, many of whom played a crucial role in developing Iran’s digital infrastructure. If Madanizadeh’s policies are supported by progress on the nuclear file and eventual sanctions relief, a similar dynamic could unfold, bringing with it not only capital and technical expertise, but renewed energy and ambition.

Overall, the confirmation of Iran’s new economy minister presents a rare opportunity for the country to confront its deep-rooted economic crises with evidence-based, technocratic leadership. Madanizadeh’s academic background, practical policy experience, and political neutrality position him as a credible agent for reform. While obstacles abound, not least the intensifying conflict with Israel, his confirmation reflects an important strand of Iranian politics—neither liberal reformist nor anti-modern conservative—that speaks to a younger, marginalized demographic eager to shape Iran’s future.

Barzin Jafartash Amiri is the Editor-in-Chief of Voice of Manufacturing, an Iranian publication.

Section: (vision-iran-initiative) Photo: EcoIran

By Esfandyar Batmanghelidj

Overnight, Israel conducted an astonishing unilateral attack on Iran, striking military facilities across the country and killing several military commanders by targeting their apartments in Tehran. Israeli Prime Minister Benjamin Netanyahu has suggested that Iran’s nuclear program posed a “clear and present danger to Israel’s very survival.” This was the pretense for an operation Netanyahu has long wanted to undertake.

Just last month, the Tulsi Gabbard, the US Director for National Intelligence, testified that “Iran is not building a nuclear weapon” and that the Supreme Leader “has not authorized the nuclear weapons program that he suspended in 2003.” The US and Iran have also been engaged in intensive nuclear negotiations. As part of these talks, Iran had made clear it was willing to accept strict verification and monitoring of its nuclear program in exchange for sanctions relief. The negotiations had recently gained momentum—Iranian Foreign Minister Abbas Araghchi was slated to meet US Special Envoy Steve Witkoff in Oman on Sunday.

Oman’s Foreign Minister, Badr Albusaidi, who is acting as the mediator for the US-Iran negotiations, has condemned Israeli’s attack as “illegal, unjustifiable and a grave threat to regional stability” and has called on the international community to “reject Israeli aggression and support de-escalation and diplomacy with one voice.” Israel’s attack was clearly intended to undermine diplomacy.

Iran now faces a harrowing decision. It lacks the conventional means to respond to Israel decisively and to re-establish deterrence—an Iranian response will beget further Israeli strikes. By taking unilateral action against Iran, Netanyahu has already made clear that he is eager for war, and he believes that he has what military planners call “escalation dominance.”

Last April, Iran was able to demonstrate that its ballistic missiles can penetrate Israeli air defenses. But a proportional response to the Israeli attack—which included strikes on residential neighborhoods and led to civilian causalities—will increase the likelihood that the US is drawn into the conflict.

Faced with this dilemma, many senior leaders in Iran will call for Iran to change its nuclear doctrine and finally build a nuclear weapon. If the country’s most fortified enrichment facility, Fordow, remains operational during the attacks, Iran can likely enrich enough uranium for several bombs in a matter of weeks. A crude weapon system could be developed and tested by the end of the year. In other words, Iran could finally and fatefully dash for the bomb.

This may be what Israel wants. Iran will not be able to weaponise in secret—the expulsion of IAEA inspectors and the dispersal of personnel and equipment to new nuclear sites will be clear signs of a change in Iran’s nuclear doctrine. Netanyahu will be able to turn to Trump and provide decisive evidence of Iranian weaponisation, spinning it as a betrayal of what Trump believes to have been an earnest effort at diplomacy.

What happens next is difficult to predict. Iran cannot win a war against the US and Israel and so weaponization is an enormous gamble. But absent a nuclear deterrent, Iran will remain vulnerable to continued attacks as Israel will remain unrestrained. Iran’s best hope may be to turn the instability in the region into a political liability for Trump, compelling him to restrain Netanyahu. Iran may therefore respond to the Israeli attacks by externalizing the damage, creating chaos for the global economy

During the first Trump term, Iran responded to U.S. “maximum pressure” by striking energy infrastructure in the United Arab Emirates and Saudi Arabia through its proxies. A sustained campaign of such attacks would see global oil prices skyrocket, undermining Trump’s domestic agenda. Already, Trump’s continued acquiescence to Netanyahu has angered his MAGA base, which elected him largely because of his repudiation of US involvement in costly and misguided wars in the Middle East. On the eve of the Israeli attack, figures such as Charlie Kirk, Steve Bannon, and Marjorie Taylor Green warned Trump against getting embroiled in a new war. In a newsletter published the morning after the attack, Tucker Carlson declared that Trump should “drop Israel” and that Israel’s conflict with Iran is “not America’s fight.”

Militarily, Iran will struggle to respond to Israeli aggression, but politically, Iranian leaders retain some room for maneuver. After nearly two decades of joint exercises and planning for a US-Israel strike on Iran’s nuclear program, Israel acted alone. This reflects the political shift that has taken place in Washington under Trump, where the hawkish “neocons” have been on the back foot. Netanyahu is the ultimate neocon. It is not clear that he can survive if Trump turns on him. That remains the best hope for Iran and the region.

Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.

Section: (vision-iran-initiative) Photo: IRNA

By Henna Moussavi

In a busy intersection in Iran’s capital city, Tehran, there is a “deceptively simple” metro station. The structure is meticulously constructed of up to 300,000 traditional bricks—a major collaboration between the station’s architects and local artisans.

Having secured the commission for the station at a time of significant protests in Iran, KA Architecture Studio wanted to recognize how public spaces “are the place of conflict in the metropolis of Tehran between the government and the people.” Such statements reflect the growing political significance that Iranian architects ascribe to their work, even when working on commissions from the government.

By placing projects like the Jahad Metro Plaza at arterial points of the city, architects in Iran are redefining the way public areas are used and determining points of congregation. In turn, their design choices spark discussion around the social and political significance of architecture beyond mere aesthetics.

Amidst recent years of social and political turmoil in Iran, a blossoming architectural scene is ever-present and defiant. Cropping up across major metropolises like Tehran and Mashhad and smaller cities like Ahvaz and Kelarabad, are new and intriguing structures, including luxury glass apartment buildings, eco-resorts with integrated mazes, colorful domed retreats, and geometric complexes. Through their ambitious designs, the structures being introduced to Iran’s cityscapes and landscapes challenge the view of Iran as a country without prospects.

These new buildings embody a cultural shift, in which features like open facades and glass walls take on a political significance. In a recent op-ed, Tehran-based correspondent Najmeh Bozorgmehr described how windows and balconies were once simply functional elements of homes in Tehran—“used for drying laundry or storing seasonal fruits and vegetables.” But today, the enlargement of open spaces in the home and the adoption of glass facades are indicative of a slow transition away from cloistered private spaces and towards an assertion of transparency and personal freedom.

While Iran’s wave of progressive architecture is growing, the completed projects vary in their accessibility to communities across Iran. Some cater to the ultra-rich, others seek to tie in varying strands of society. What can be said about either type of project is that they both strive to address qualms about Iran’s sociopolitical condition, while also attempting to invigorate a new wave of artistry, celebrate and interpret cultural heritage, and encourage a sense of community.

Historically, architects in Iran had to mask the political implications of their field. In a notable example, Architecture Magazine, long a leading publication for Iranian architects, did not “want to have the slightest conflict with the world of politics,” according to one historian. Ambivalence was chosen to ensure the “survival of the architectural profession as an independent practice, on the one hand guaranteed [architects’] livelihood[s] and on the other was of great importance for the government’s ‘nation-building’” objectives. But this cautious approach faded in the following decades, given that the architectural profession, like everything else in Iran for that matter, was clearly entangled with the political circumstances of the country. In 2022, during the aftermath of the arrest and death of Mahsa Amini while in the custody of the morality police, many architectural studios halted operations in solidarity and emphasized their commitment to the people.

Notably, many talented Iranian architects choose to remain in Iran despite the limitations politics may pose for their career—a decision that may be difficult to understand given the extent of brain drain plaguing other industries in the country. Mainly driven by political repression and, in turn, isolation from the global economy, young, highly-skilled Iranians are increasingly fleeing for better opportunities elsewhere. Even Iranian President Masoud Pezeshkian has claimed that up to 80 percent of students are contemplating emigration.

In an interview for this article, one young Iranian architect described his decision to stay as a “professional choice.” Architects in Iran can still pursue ambitious projects. For instance, Hooba Design Group has announced plans for a futuristic and eco-friendly residential complex in Kelarabad with a design guided by “regional architecture and local environmental laws.” Composed of stacked volumes of villas, each with their own glass facades and airy interiors, the renderings show a bold vision. Projects like this are encouraging Iranian architects to match the ambition of architects in Europe or the United States, where many had studied or worked before returning to Iran.

The homegrown team behind the Hooba project, like others, speaks to a sentiment articulated by the late Iranian architect, Ali Akbar Saremi. After having spent many years in the US, Saremi returned to Iran. When asked why he returned, he stated, “when I finished university and got my doctorate, there was no reason for me to stay there anymore. We wanted to return and develop our country… After all, our homeland is here and there was no reason to stay there.” His advice to rising architects was to “try to understand what is going on in the world,” as “we are the architects of a social class and we must understand the ins and outs of our society as well as other societies.” Such ideas have proven influential, with many Iranian architects thinking actively about their capacity to use architecture to shape social relations.

The most ambitious architects are further encouraged by opportunities for domestic recognition in the field. Memar Magazine, founded in 1988, is a bimonthly Persian publication on architecture and urban design. The prestigious Memar Award was initiated by the magazine in 2001 and strives to recognize the most prominent Iranian architects and their projects. The prize promotes a tangible sense of prestige, motivation, and visibility for architects in Iran to establish themselves both domestically and internationally, “paving the way for them to attract more clients who seek progressive designs for their projects.” Putting young designers in the spotlight in this way is a critical aspect of their pursuit of larger projects, drawing in capital to this specific industry.

Iranian architecture has also earned international accolades. The Jahad Metro Plaza, for one, was recognized by the RIBA International Awards for Excellence, as well as the Dezeen Awards. Architect Alireza Taghaboni, upon winning the Royal Academy Dorfman Award, explained how he aimed for his architecture “to have a productive purpose in a country where the context is political,” representing concerns with domestic issues in an international context.

Alongside politics, Iranian architects must also consider the state of the economy. Notable architect Farhad Ahmadi has stated that “if architecture wants to flourish in a society, the culture, knowledge, management, and economy of that country must also flourish.” It may be surprising, therefore, that a country facing significant economic challenges is home to a burgeoning architecture scene. But wealthy Iranians consider real estate to be a safe investment, and thus the field is supported by a steady stream of private commissions—even as sanctions and other economic headwinds continue to affect the construction sector. Hossein Hamdieh, an architectural researcher, noted in an interview that ‘‘avant-garde designs are often created for moneyed minorities who have both the appetite and the means to invest in such lavish, costly projects.”

On the other hand, Iranian architects have long developed projects with specific social objectives, such as improving the welfare of ordinary people or addressing environmental issues. These projects are often delivered in partnership with civil society organizations. For instance, FEA Studio, on the behalf of the NGO Noor-e Mobin, designed an intricate network of classrooms in the desert, near Bastaam, Iran. Opened in 2014, the G2 Primary School, as it is called, is designed in ways that allow children to play freely, featuring open air rooms with balcony-style railings to maintain their safety. FEA Studio commented that “it’s a complex in which the children can grow and taste life,” serving the pedagogical goals of the school.

In another social project, ZAV Architects fit adjustable outdoor curtains to the balconies of a girls orphanage in Khansar, Iran. The Habitat for Orphan Girls is a residential centre aiming to protect young women, ages seven to 16, supporting them to flourish in adverse life circumstances. This particular project drew attention in the context of the anti-hijab movement in Iran. The architects aimed to allow the girls a comfortable and protected outdoor space where they can sit without a headscarf or hair covering, but used a striking yellow color to make these liminal spaces visible.

ZAV Architects’ founder, Mohamadreza Ghodousi told Dezeen that the building has the aesthetic appeal of interacting colorfully with the rest of the city, while also reminding its inhabitants that the “hijab is dynamic and you may have the right to wear it or not.” The project won the Memar Award in 2020.

The current sentiment among Iranian architects may be best summarized by one of the best, Leila Araghian. Araghian won the prestigious Aga Khan Prize for her 270-metre long bridge, Pol-e Tabiat, which connects Taleghani Park and Ab-o-Atash Park in northern Tehran. When asked what she finds exciting about contemporary architecture and design, she responded: “the possibility to affect the environment which can affect the human experience of the space seems fascinating to me. It makes me feel powerful.” It is precisely this outlook that promotes architecture as a tool for social renewal, transforming quotidian spaces for Iranians to feel a sense of liberation, agency, and connectedness.

Architecture in Iran today is more than just an artistic or functional endeavor; it is a medium for expression, resistance, and societal transformation. As architects navigate the challenges of working within an increasingly restrictive political environment, they continue to create structures that serve as both aesthetic marvels and meaningful social statements.

Whether through luxurious glass facades symbolizing a desire for transparency, or community-driven projects that foster inclusivity and interaction, contemporary Iranian architecture reflects the country’s shifting landscape. At its core, this architectural movement challenges perceptions of Iran, both domestically and internationally, proving that even in times of hardship, creativity and innovation can flourish. Architects in Iran are shaping more than just skylines—they are reimagining and rebuilding the very structures of public and private life.

Henna Moussavi is an editorial fellow at the Bourse & Bazaar Foundation.

Section: (vision-iran-initiative) Photos: Mohammad Hassan Ettefagh, Soroush Majidi, ZAV Architects