Rapid inflation and collapsing purchasing power have pushed millions of households into severe hardship, while foreign currency shortages undermine food imports.By Mardo Soghom, Middle East ForumIf 2015, the year Iran signed a nuclear deal with world powers, marked the high point of optimism about the country’s future, 2025 came to symbolize its slide into economic and political paralysis.The year opened with the Islamic Republic reeling from a combination of regional setbacks and a deepening domestic crisis that increasingly resembled chaos in governance.Iran lost Syria shortly before the year began, when Sunni jihadists overthrew Syria’s Bashar al-Assad.Repeated Israeli operations crippled Hezbollah in Lebanon, another pillar of Iran’s regional strategy.Hamas remained underground, but Tehran had little capacity to rescue or meaningfully support the force it had spent years financing and arming.These setbacks only foreshadowed the turbulence that followed. In January, Tehran faced President Donald Trump’s second term in the White House.He was the man who had torn up the 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal in his first term and repeatedly warned of consequences if the Islamic Republic did not end its nuclear program and forsake its mischief in the region.This juxtaposed sharply with the Biden administration’s prolonged, inconclusive engagement during the previous four years that largely followed President Barack Obama’s policy of attempting to rehabilitate, or at least coexist with, the Islamic Republic.Trump quickly signaled that patience would not define his second term. On February 4, he issued a policy directive restoring “maximum pressure” on Tehran.His National Security Presidential Memorandum laid out three priorities: denying Iran a nuclear weapon and intercontinental ballistic missiles; neutralizing its terrorist networks; and countering its missile development and broader asymmetric and conventional military capabilities.Several rounds of talks followed, during which Tehran insisted on its right to uranium enrichment. At one point it appeared that Washington would accept limited enrichment, but then its position reverted to the original stance.These talks ended with no agreement.On June 12, Israel launched an air campaign against Iran’s nuclear and military infrastructure, eliminating senior commanders in the opening hours and rapidly establishing air dominance across roughly 636,000 square miles of Iranian territory.Tehran responded with ballistic missile launches, but the strikes caused limited damage in Israel and quickly diminished in scale.The twelve-day war shattered the image of military strength cultivated through decades of official propaganda. Regional observers concluded that while Iran could fire missiles, its deterrence had failed.The extensive proxy network built at a cost of tens of billions of dollars over more than four decades proved incapable of mounting a meaningful response against Israel.The military setback also underscored the government’s broader inability to manage the country. The national currency lost 71 percent of its value between the end of 2024 and mid-December 2025.Although the Trump administration failed to halt Iran’s oil exports entirely, shipments to its sole major buyer, China, fell from 1.55 million barrels per day in 2024 to around 1.2 million, as global oil prices declined.Data from industry tracker Kpler indicate that Iran now holds roughly 200 million barrels of unsold crude in floating storage.As economic conditions worsened, Iranian dissidents voiced optimism on social media that sustained external pressure, combined with growing public discontent, could bring political change.Food prices rose by several percentage points each month as the rial weakened and imports grew more expensive.Shortages of electricity, water, and heating gas reached new highs in 2025, the result of decades of neglect that the authorities now appear unable to reverse.Rapid inflation and collapsing purchasing power have pushed millions of households into severe hardship, while foreign currency shortages undermine food imports.Economists and policy insiders warn that, without a change in course, food shortages and hunger-driven unrest could become difficult to avoid.Rice prices, a staple of the Iranian diet, have surged, prompting some officials to urge citizens to conserve or substitute cheaper grains such as barley.Israel has warned that renewed efforts by Iran to rebuild its ballistic missile arsenal or nuclear facilities could justify further military action. Tehran has responded cautiously, while continuing to insist on its right to enrichment.At home, the authorities face an increasingly precarious balancing act. Rising dissent can be met with repression, but harsher crackdowns risk triggering even more destabilizing consequences.Iran may be approaching the end of an inefficient political system shaped by Islamism, patronage networks, entrenched corruption, and an aggressive foreign policy.External pressure, combined with mounting internal strain, could prove decisive in forcing change in the coming year.The post The year in review: Iran faces paralysis at home and pressure abroad appeared first on World Israel News.