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Iran Risks Severe Economic Downturn, Unrest as Renewed UN Sanctions Bite
People walk near a mural of Iran’s Supreme Leader, Ayatollah Ali Khamenei, amid the Iran-Israel conflict, in Tehran, Iran, June 23, 2025. Photo: Majid Asgaripour/WANA (West Asia News Agency) via 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 maneuver after a snapback of UN sanctions.
They followed a breakdown in talks to curb Iran‘s disputed nuclear activity and its ballistic missile program. Diplomacy to resolve the deadlock remains possible, both sides say, though Iranian Supreme Leader Ayatollah Ali Khamenei has rebuffed US President Donald Trump’s offer to forge a new deal.
Three senior Iranian officials, speaking on condition of anonymity, said Tehran believes the US, its Western allies, and Israel are intensifying sanctions to fuel unrest in Iran and jeopardize the very existence of the Islamic Republic.
Since the reimposition of UN sanctions on Sept. 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 US 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 UN 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 US from Tehran’s 2015 nuclear deal with six world powers and reimposed US sanctions.
But the revival of wider UN 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 US sanctions. It rebounded in 2020 to grow modestly at times, largely due to oil trade with China.
But the World Bank this month forecast a shrinkage of 1.7 percent in 2025 and 2.8 percent in 2026 – sharply down from the 0.7 percent growth it had projected in April for next year.
While Tehran still relies heavily on oil exports to China – its biggest customer and one of the few countries still doing business with it despite Trump’s “maximum pressure” policy, doubts reign over the sustainability of that trade.
Although sold at a discount, crude remains a vital source of income for Tehran, with oil and petrochemicals making up about a quarter of GDP in 2024.
Despite public assurances that oil sales to China will continue, one Iranian official said the reimposed global sanctions could stifle that flow.
Shokri said that if China seeks to ease tensions with the Trump administration, it may tighten its stance on Iranian oil — demanding steeper discounts or cutting imports altogether.
For Tehran, the costs could be devastating. Every dollar shaved off the price of oil translates into roughly half a billion dollars in lost annual revenue, he said.
The rial has shriveled to 1,115,000 per dollar from 920,000 in August, stoking inflation to at least 40 percent and gutting purchasing power. Persistent currency depreciation and trade sanctions are driving up prices and sapping investor confidence.
HARDSHIP SPREADS, PUBLIC ANGER SIMMERS
Few Iranians can escape the attendant hardships. A sense of desperation is rippling through society, affecting urban professionals, bazaar traders and rural farmers alike.
“How much more pressure are we supposed to endure? Until when? I’m a government employee, and I earn just 34 million tomans (around $300) a month,” said Alireza, 43, speaking by phone from the capital Tehran. Like others, he asked not to be further identified for fear of retribution from authorities.
“My wife is jobless. The import-export company she worked for shut down last month. With just my salary and two kids, we’re struggling to even pay rent and school expenses. What are we supposed to do?” ”
Iran’s official inflation rate is around 40 percent though some estimates exceed 50 percent. Official data in September showed prices for 10 staple goods – including meat, rice and chicken – rose 51 percent in one year. Housing and utility costs have also surged. Beef now costs $12 a kilo – too expensive for many families.
The clerical elite increasingly worry that mounting public distress could reignite mass protests that have erupted periodically since 2017 among lower- and middle-income Iranians, the second Iranian official said.
Many Iranians like Sima, 32, a factory worker in the central city of Shiraz worn down by years of economic strain, worry that the expanded sanctions will push them past the breaking point.
“Now they say we’re facing new sanctions again, but we’re already struggling to provide for our three children. Prices go up every single day and we can’t even afford to buy meat for them once a month,” said Sima.
Many business owners fear deeper international isolation and further Israeli airstrikes if diplomacy fails to resolve the nuclear standoff.
“With the constant fear of a possible attack and not knowing whether I’ll even be able to export this month or next, how am I supposed to keep my business running?” said Mehdi, who ships fruit to neighboring countries.
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UK Counterterrorism Police Investigate Arson at Jewish Memorial Wall
An Orthodox Jewish man walks by at a wall showing pictures of protesters killed during anti-government demonstrations in Iran, in Golders Green, London, Britain, March 7, 2026. Photo: REUTERS/Jack Taylor
Police said on Tuesday they were investigating suspected arson at a memorial wall in a part of north London that is home to a large Jewish community, amid a recent spate of such incidents in the British capital.
London’s Metropolitan Police said the investigation was being led by Counter Terrorism Policing, though it was not being treated as a terrorist incident. They said no arrests had been made.
The incident occurred on Monday at the site of a memorial wall dedicated to people killed in Iran in a bloody crackdown after anti-government protests spread across the country in January. Police said the memorial wall had not been damaged.
“We recognize that this incident will heighten concerns in the Golders Green area, where residents have already faced a series of attacks,” Detective Chief Superintendent Luke Williams said in a statement.
Over the last month, counter–terrorism officers have arrested more than two dozen people as part of investigations into attacks on Jewish-linked premises, including the torching of ambulances belonging to the Jewish volunteer emergency service Hatzola in Golders Green on March 23.
Police said after an arson attack at a synagogue this month that they were investigating possible Iranian links to the incidents. A pro-Iranian government group has said it was responsible.
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Ukraine in Diplomatic Tussle With Israel Over Grain Kyiv Says ‘Stolen’ by Russia
A farmer operates a combine during the start of the wheat harvesting campaign in a field near the town of Starobilsk (Starobelsk) in the Luhansk Region, a Russian-controlled area of Ukraine, July 9, 2025. Photo: REUTERS/Alexander Ermochenko
Ukraine and Israel traded diplomatic blows on Tuesday as President Volodymyr Zelenskiy condemned what he said were grain purchases from occupied Ukrainian territory “stolen” by Russia and threatened sanctions against those attempting to profit from it.
Kyiv considers all grain produced in the four regions that Russia claims as its own since invading Ukraine in 2022 as well as Crimea, annexed by Russia in 2014, to be stolen and has protested over its export to other countries.
Russia calls the regions its “new territories,” but they are still internationally recognized as Ukrainian. Moscow has not commented on the legal status of grain collected in them.
“Another vessel carrying such grain has arrived at a port in Israel and is preparing to unload,” Zelenskiy said on X, adding: “This is not – and cannot be – legitimate business.”
“The Israeli authorities cannot be unaware of which ships are arriving at the country’s ports and what cargo they are carrying,” added Zelenskiy.
Ukraine on Tuesday summoned Israel‘s ambassador over what Kyiv described as Israeli inaction in allowing shipments of grain to enter the country from Russian-occupied Ukraine.
Ukraine‘s foreign ministry said in a statement it handed the ambassador a “note of protest.”
Israeli Foreign Minister Gideon Saar said that Kyiv has not provided any evidence for its claims.
“The vessel has not entered the port and has yet to submit its documents. It’s not possible to verify the truth of the Ukrainian claims,” he told a news conference in Jerusalem.
Saar said Ukraine had not submitted any request for legal assistance and rejected what he called “Twitter diplomacy.”
“Israel is a state that abides by the rule of law. We say again to our Ukrainian friends, if you have any evidence of theft submit it through the appropriate channels,” he said.
Ukrainian foreign ministry spokesman Heorhii Tykhyi told reporters that Kyiv has provided “extensive information and proof” that the cargo was illegal before going public. The foreign ministry published a timeline of its actions and contacts with Israeli authorities.
“We will not allow any country in any geography to facilitate illegal trade with a stolen grain that finances our enemy,” Tykhyi said.
Kremlin spokesman Dmitry Peskov declined to comment on Tuesday, saying Russia would not get involved. “Let the Kyiv regime deal with Israel on its own,” he said.
Traders have told Reuters that it is impossible to track the origin of wheat once it is mixed.
UKRAINE PREPARING SANCTIONS PACKAGE
Anouar El Anouni, EU foreign affairs spokesperson, said the bloc had taken note of reports that a “Russian shadow fleet vessel” carrying stolen grain had been allowed to dock at Haifa. He said the European Commission had approached Israel‘s foreign ministry on the issue.
“We condemn all actions that help fund Russia‘s illegal war effort and circumvent EU sanctions, and remain ready to target such actions by listing individuals and entities in third countries if necessary,” he said.
Zelenskiy said Ukraine was preparing a sanctions package against those transporting the grain and the individuals and legal entities attempting to profit from the scheme.
Zelenskiy said Kyiv has taken “all necessary steps through diplomatic channels,” but the ship had not been stopped.
“Russia is systematically seizing grain on temporarily occupied Ukrainian land and organizing its export through individuals linked to the occupiers,” Zelenskiy said.
“Such schemes violate the laws of the State of Israel itself,” he added.
Ukraine expected Israel to respect Ukraine and refrain from actions that undermine bilateral relations, he added.
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Britain Challenges Court Decision That Palestine Action Ban Was Unlawful
Protesters from “Palestine Action” demonstrate on the roof of Guardtech Group in Brandon, Suffolk, Britain, July 1, 2025. Photo: REUTERS/Chris Radburn
Britain on Tuesday sought to uphold a ban on anti-Israel group Palestine Action, which it has designated a terrorist organization, after a court ruling that the move unlawfully interfered with freedom of expression.
Palestine Action, which had increasingly targeted Israel‑linked defense companies in Britain with a particular focus on Israel’s largest defense firm Elbit Systems, was proscribed under terrorism laws last year.
London’s High Court ruled in February that the ban was unlawful, although it remains in force pending the outcome of the government’s appeal, which began on Tuesday.
Lawyers for Britain‘s interior minister, Shabana Mahmood, told the Court of Appeal that the finding that the ban had a significant impact on freedom of expression was “overstated and wrong.”
Huda Ammori, who co-founded Palestine Action in 2020 and brought the successful challenge, argues proscription has imposed “severe restrictions on the fundamental free speech and assembly rights of vast numbers of people.”
UK APPEAL COMES DURING CRIMINAL TRIAL
Palestine Action was banned shortly after a June break-in at the Royal Air Force’s Brize Norton air base, in which activists damaged two military planes.
The ban placed the group on a par with Islamic State or al Qaeda, making membership a criminal offense punishable by up to 14 years in prison.
More than 2,700 people have since been arrested for holding signs in support of Palestine Action, though charges could be dropped if the High Court‘s ruling is upheld.
After February’s decision, London’s Metropolitan Police said it would pause arrests while reviewing its position, but resumed enforcement earlier this month, arresting over 500 people.
The High Court‘s decision was announced shortly after six people charged over the 2024 raid on Elbit were all acquitted of aggravated burglary.
Those six are currently on trial for criminal damage, with one defendant also accused of assaulting a police officer with a sledgehammer. All have pleaded not guilty.