Iran risks severe economic downturn, unrest as renewed UN sanctions bite
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Iran risks severe economic downturn, unrest as renewed UN sanctions bite
Reuters-Oct22,2025
By: Parisa Hafezi
- Revived UN sanctions tighten economic noose on Islamic Republic
- Sanctions prompted by impasse in negotiations to curb Iran’s nuclear and ballistic missile programmes
- With public anger simmering, clerical elite scrambling to avert economic meltdown, shore up rule
- Ordinary Iranians increasingly struggle with soaring prices, shrinking incomes
DUBAI, Oct 21 (Reuters) – Iran’s economy is at risk of simultaneous hyperinflation and severe recession, officials and analysts say, as clerical rulers scramble to preserve stability with limited room to manoeuvre after a snapback of U.N. sanctions.
They followed a breakdown in talks to curb Iran’s disputed nuclear activity and its ballistic missile programme. Diplomacy to resolve the deadlock remains possible, both sides say, though Iranian Supreme Leader Ayatollah Ali Khamenei has rebuffed U.S. President Donald Trump’s offer to forge a new deal.
Three senior Iranian officials, speaking on condition of anonymity, said Tehran believes the U.S., its Western allies and Israel are intensifying sanctions to fuel unrest in Iran and jeopardise the very existence of the Islamic Republic.
Since the reimposition of U.N. sanctions on September 28, multiple high-level meetings have been held in Tehran on how to avert economic collapse, circumvent sanctions and manage simmering public anger, the officials told Reuters.
Deepening economic disparities between ordinary Iranians and a privileged clerical and security elite, economic mismanagement, galloping inflation and state corruption – reported even by state media – have fanned discontent.
“The establishment knows protests are inevitable, it is only a matter of time … The problem is growing, while our options are shrinking,” said one of the officials.
Iran’s leadership is leaning heavily on its “resistance economy” — a strategy of self-sufficiency and closer trade with China, Russia and some regional states. Moscow and Beijing back Iran’s right to peaceful nuclear energy and condemned U.S. and Israeli strikes on three Iranian nuclear sites in June.
But analysts warn that such workarounds may not be enough to shield the sprawling country of 92 million people from the renewed economic blow.
“The impact of the U.N. sanctions will be severe and multifaceted, deepening the country’s longstanding structural and financial vulnerabilities,” said Umud Shokri, an energy strategist and senior visiting fellow at George Mason University near Washington.
“The government is struggling to maintain economic stability as sanctions disrupt banking networks, restrict trade and constrain oil exports – the country’s main revenue source, resulting in escalating social and economic pressure.”
OIL LIFELINE UNDER THREAT AS UN SANCTIONS RETURN
Iran has avoided wholesale economic meltdown since 2018 when, during his first term, Trump withdrew the U.S. from Tehran’s 2015 nuclear deal with six world powers and reimposed U.S. sanctions.
But the revival of wider U.N. sanctions is inflicting shocks that will stymie economic growth, accelerate inflation and the collapse of the rial currency, pushing the economy toward a recessionary spiral, one of the Iranian officials said.
Iran’s economy contracted sharply after 2018 due to renewed U.S. sanctions. It rebounded in 2020 to grow modestly at times, largely due to oil trade with China.
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