In the past few days, Iran has experienced the biggest protests against the ruling Islamic Republic since it crushed the 2022 “Woman, Life, Freedom” uprising. The regime is the weakest it has ever been: Its proxies, from Hezbollah to the Assad regime in Syria, lie shattered across the Middle East, while its vaunted missile force was dealt a serious blow by Israel during their 12-day conflict in June 2025. Tehran and much of the rest of the country are running out of water; the economy is in sharp decline; and more Iranians are going hungry, especially members of what was once the middle and upper-middle classes.

The most recent protests were triggered by deteriorating economic conditions, but they are the most recent manifestation of deeper-rooted public anger against the regime. The immediate trigger for these protests appears to have been a budget bill, rejected by parliament, in which the government proposed removing the preferential exchange rate (285,000 rials to the U.S. dollar)—a mechanism widely viewed as a rent distribution channel. Regime-connected networks profit from the spread between official/preferential rates and the open market.

In the past few days, Iran has experienced the biggest protests against the ruling Islamic Republic since it crushed the 2022 “Woman, Life, Freedom” uprising. The regime is the weakest it has ever been: Its proxies, from Hezbollah to the Assad regime in Syria, lie shattered across the Middle East, while its vaunted missile force was dealt a serious blow by Israel during their 12-day conflict in June 2025. Tehran and much of the rest of the country are running out of water; the economy is in sharp decline; and more Iranians are going hungry, especially members of what was once the middle and upper-middle classes.

The most recent protests were triggered by deteriorating economic conditions, but they are the most recent manifestation of deeper-rooted public anger against the regime. The immediate trigger for these protests appears to have been a budget bill, rejected by parliament, in which the government proposed removing the preferential exchange rate (285,000 rials to the U.S. dollar)—a mechanism widely viewed as a rent distribution channel. Regime-connected networks profit from the spread between official/preferential rates and the open market.

While the preferential rate is widely viewed as a corrupt insider deal for regime-connected networks, many households also feared that removing it—without a credible, transparent replacement—would immediately raise prices for basic goods. That mix of rage at corruption and anxiety about inflation turned the debate over the exchange rate into a trigger for protest.

In the days after the budget dispute, the fight over “reform” versus rent distribution morphed into a currency panic: President Masoud Pezeshkian’s administration and allied technocrats argued that the preferential rate fuels rent-seeking, whereas a conservative-led parliament leadership and the entrenched import and intermediary interests benefit from subsidized foreign exchange. In late December, the rial slid to around........

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