How did we get to war in Iran? There are a few answers. You could point to the Oct. 7, 2023, massacre in Israel by Hamas, the Islamic Republic’s long-running terrorist proxy. There’s also the 1979 hostage crisis, when Iranian students stormed the U.S. Embassy in Tehran and held Americans captive for 444 days. Or there’s the U.S.-aided coup that removed Prime Minister Mohammed Mossadegh in 1953, and Washington’s support for the shah.
But the most immediate cause of the ongoing operation was the Iranian people’s protests against their regime. On Jan. 13, President Donald Trump declared on Truth Social, “Iranian Patriots, KEEP PROTESTING – TAKE OVER YOUR INSTITUTIONS!!! … HELP IS ON ITS WAY!” It took 46 days for that help to arrive, but when it did, it was on a massive scale.
Among the reasons the Iranian protesters were furious with their thuggish rulers in Tehran: As 2025 ended, the country’s economy was collapsing. According to a local dispatch, the Iranian central bank stated in late December that “point-to-point inflation rose to 52.6 percent in the month to late December, up 3.2 percentage points from the previous month, while average annual inflation climbed to 42.2 percent.” It got worse yet. “Prices of food, beverages and tobacco up 72 percent year-on-year, compared with 43 percent for nonfood goods and services. Monthly inflation reached 4.2 percent, led by sharp increases in staples such as dairy and bread.” That report comes courtesy of the Tehran-based Tasnim News Agency, which is affiliated with Iran’s Islamic Revolutionary Guard Corps. In other words, it’s possible that those numbers are the positive spin.
In February, Iran’s central bank began distributing the country’s largest banknote, a 5 million-rial. When it was issued, it was worth about $3.10. Last week, Forbes rated it the least valuable currency in the world.
Though international sanctions hamstring Iran’s economy, the country also has real problems with corruption and policies favoring the regime’s cronies. As Ali Ansari, director of the Institute for Iranian Studies at the University of St. Andrews, wrote in January: “Iran’s economy is shaped by short-termism, opaqueness and a lack of accountability that determines, and is itself defined by, the absence of the rule of law.”
“As one foreign businessman noted to me,” Ansari added, “why should we invest when the Iranians don’t? Any investment, certainly of a strategic nature, tended to be handled by the state, which of course served to strengthen the state further against any embryonic private sector.”
We’ve seen other protests against the Iranian regime over the years — 2009, 2011, 2017, 2018, 2022. What made this worse was that average Iranians were watching their currency become worthless and food get increasingly expensive. Never mind that the mullahs weren’t exactly overflowing with ideas to solve the problem. Even if the regime brutally suppressed the protests — which it appears it has, at least for now — the same economic problems are waiting on the other side of the conflict. Only then, they will be worse.
Earlier this year, the Financial Times reported that Iran’s Ministry of Defense Export Center is “prepared to negotiate military contracts that allow payment in digital currencies, as well as through barter arrangements and Iranian rials.” It’s a lot tougher to sell arms to other countries when your munitions and weapons manufacturing plants have been blown to pieces.
Iran’s “shadow fleet” of tankers is no longer so reliable either. Beyond the U.S. Navy hunting down and seizing them, some aren’t so eager to sail through the Gulf when missiles and drones are flying. Lloyd’s List reported that “at least six ballast shadow fleet tankers made U-turns after the start of the conflict on February 28. Four tankers diverted while sailing westbound towards the Strait of Hormuz, presumably to load Iranian oil, however most of these are now drifting in the Gulf of Oman or the Arabian Sea.”
The Iranian mullahs weren’t exactly known as economic savants before the shooting started. Even if they retain power after the war, they’re going to be broke. Rebuilding their military will be expensive, and handouts for Hamas or Hezbollah, or a nuclear-weapons program, will look like unaffordable luxuries. The war is causing economic stress for the U.S. and its allies, but it’s worsening an ongoing economic nightmare for the Iranians.
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