The streets of Tehran and several provincial capitals have once again become the stage for a high-stakes political drama, as the fledgling administration of President Masoud Pezeshkian faces its first major systemic crisis. Elected on a platform of "rationality" and a promise to bridge the widening chasm between the Islamic Republic’s clerical leadership and its disillusioned youth, Pezeshkian now finds himself squeezed between the uncompromising demands of the street and the rigid structural constraints of the Iranian deep state. This resurgence of public dissent, driven by a volatile mix of economic desperation and social frustration, serves as a stark reminder that the "reformist" label carries a heavy burden in a nation where the levers of power remain firmly in the hands of unelected bodies.
The current wave of unrest is not a monolithic movement but rather a convergence of various grievances that have simmered since the "Woman, Life, Freedom" protests of 2022. While the previous uprising was sparked by social and cultural repression, the present agitation is increasingly defined by the "bread and butter" issues that have crippled the Iranian middle class. With inflation hovering stubbornly around the 40% mark and the national currency, the rial, continuing its downward trajectory against the US dollar, the average Iranian’s purchasing power has effectively evaporated. For Pezeshkian, who campaigned on the promise of economic stabilization through international engagement, the domestic pressure to deliver immediate relief is reaching a breaking point.
Central to the administration’s struggle is the inherited wreckage of a "resistance economy" that has struggled to function under the weight of comprehensive international sanctions. The Pezeshkian government has identified the lifting of these sanctions—primarily through a revival of the Joint Comprehensive Plan of Action (JCPOA) or a similar nuclear framework—as the only viable path to long-term recovery. However, the geopolitical landscape has shifted dramatically since the 2015 deal. The escalation of regional tensions, particularly the direct and indirect confrontations with Israel, has emboldened hardline factions within the Islamic Revolutionary Guard Corps (IRGC). These elements view any diplomatic overture to the West as a sign of weakness, creating a domestic political environment where the President’s reformist agenda is viewed with deep suspicion.
Economically, the government is grappling with a massive budget deficit, estimated by some independent analysts to exceed 30% of total planned expenditures. This fiscal gap is compounded by a chronic energy crisis. Despite possessing some of the world’s largest oil and gas reserves, Iran suffers from aging infrastructure and a lack of foreign investment, leading to frequent power outages and natural gas shortages during peak seasons. To address the deficit, the government has floated the idea of reducing energy subsidies—a move that is economically sound but politically explosive. Previous attempts to hike fuel prices, most notably in November 2019, resulted in nationwide riots that were met with a lethal state crackdown. Pezeshkian’s challenge is to implement necessary fiscal reforms without triggering a similar conflagration.
The social dimension of the protests remains equally potent. During his campaign, Pezeshkian criticized the heavy-handed tactics of the morality police and suggested a more lenient approach to the mandatory hijab laws. Yet, months into his term, many Iranians report that the "Noor" (Light) plan—a renewed enforcement of dress codes—remains active. This perceived disconnect between the President’s rhetoric and the reality of state enforcement has led to a sense of betrayal among the younger demographic, particularly Gen Z, who were instrumental in his narrow electoral victory. The youth unemployment rate, which remains significantly higher than the national average, further fuels this fire, creating a generation with little stake in the current system and even less hope for the future.
Market data reflects this uncertainty. The Tehran Stock Exchange (TSE) has shown significant volatility as investors weigh the risks of domestic instability against the potential for a diplomatic breakthrough. Foreign direct investment (FDI) remains virtually non-existent outside of the oil sector, and even there, it is largely limited to Chinese entities operating under opaque agreements. The "brain drain" phenomenon also continues unabated; Iran is losing its most skilled professionals—engineers, doctors, and tech entrepreneurs—at an alarming rate, further hollowing out the country’s economic potential.
Expert analysis suggests that Pezeshkian’s ability to navigate this crisis depends on his relationship with Supreme Leader Ayatollah Ali Khamenei. In the Iranian political hierarchy, the President functions more as a chief executive than a head of state, with ultimate authority over foreign policy, security, and major economic decisions resting with the Supreme Leader. Pezeshkian has been careful to frame his reforms within the context of "systemic preservation," arguing that social easing and economic opening are necessary to ensure the survival of the Islamic Republic. However, the "deep state"—a network of military, judicial, and clerical elites—often views such reforms as the first step toward a "velvet revolution."
Global comparisons offer a sobering perspective. Like other nations that have attempted to transition from a closed, sanctioned economy to a more integrated one, Iran faces the "J-curve" effect, where conditions often worsen before they improve. However, unlike the transitions seen in Southeast Asia or parts of Eastern Europe, Iran’s reform process is hampered by an ideological framework that views globalization with inherent distrust. The Pezeshkian administration’s attempt to join the Financial Action Task Force (FATF) is a prime example. While the President argues that adhering to global anti-money laundering standards is essential for banking normalization, hardliners block the move, fearing it would expose the financial networks used to support regional proxies.
The regional security environment adds another layer of complexity. As Iran continues its support for the "Axis of Resistance"—including Hezbollah in Lebanon, Hamas in Gaza, and the Houthis in Yemen—the financial burden of these commitments is increasingly scrutinized by a domestic public that sees its own infrastructure crumbling. "Leave Palestine, think of us," has become a recurring slogan in recent protests, signaling a growing resentment toward the state’s ideological expenditures abroad at a time of domestic scarcity.
If Pezeshkian fails to deliver tangible economic improvements or significant social liberalization, the moderate faction of Iranian politics may face total marginalization. This would leave the field open to more populist, hardline figures who favor a "look to the East" strategy, deepening ties with Russia and China while further isolating Iran from the Western financial system. Such a shift would likely lead to an even more securitized domestic environment, as the state seeks to maintain control through coercion rather than consensus.
The immediate future of the Pezeshkian presidency will likely be decided by his administration’s ability to manage two looming deadlines. The first is the presentation of the next fiscal year’s budget, which will reveal the extent of planned subsidy cuts and social spending. The second is the window for nuclear negotiations before the "snapback" mechanism of the JCPOA expires in 2025, which would automatically reinstate all UN sanctions.
As the protests continue, the President’s "reformist" agenda is being tested not just in the halls of parliament, but in the squares and bazaars across the country. The outcome will determine whether Iran can find a path toward gradual modernization or whether it is destined for a cycle of stagnation and upheaval. For now, the Iranian government remains in a state of precarious equilibrium, attempting to manage a population that is no longer satisfied with promises of "patience" and "resilience." The stakes could not be higher: for Pezeshkian, it is a test of political survival; for the Iranian people, it is a struggle for a viable future; and for the international community, it is a pivotal moment that will define the Middle East’s geopolitical landscape for years to come.
