Iran’s Unrest Deepens, Raising Global Stakes for Regime’s Future and Oil Markets

As protesters flood Iran’s streets night after night, nations across the region and the world grapple with the potential fall of the Iranian regime—a pivotal event poised to reshape the global political map and energy markets.

The regime, led by Supreme Leader Ali Khamenei, has weathered numerous protest waves before. However, the current demonstrations, now two weeks old, are expanding. According to some estimates, hundreds of thousands defied authorities’ threats and a violent crackdown over the weekend, taking to the streets in the capital Tehran and dozens of other cities across the nation of 90 million people.

U.S. President Donald Trump, fresh from the arrest of Venezuelan President Nicolas Maduro, encourages the protesters. In recent days, Trump reiterated his threat to strike Iran, signaling a potential return to regime change tactics.

Hundreds Killed, Thousands Arrested

World leaders and investors closely monitor the developments. A White House official stated that U.S. military leaders have briefed Trump on military strike options.

Brent crude jumped over 5% on Thursday and Friday, surpassing $63 a barrel, as investors priced in the possibility of supply disruptions from OPEC’s fourth-largest producer.

“This is the biggest moment in Iran since 1979,” said William Asher, a former senior Middle East analyst for the CIA, referencing the revolution that established the Iranian regime in 1979, which shifted regional power dynamics and led to decades of animosity between Tehran, the United States, and its allies.

Asher added, “The regime is in a very difficult spot right now, and the primary driver is the economy. I think it has a narrow window to reassert control, and limited tools to do so.”

According to the Associated Press, citing the U.S.-based Human Rights Activists News Agency, more than 500 protesters have been killed and over 10,000 arrested in the past two weeks. The demonstrations, initially sparked by a currency crisis and economic collapse, now focus on overthrowing the regime.

Since Thursday, authorities have attempted to cut internet and phone networks in an effort to contain escalating Iranian anger over government corruption, economic mismanagement, and repression. Foreign airlines have also canceled flights to the country.

Trump’s Threats and Regional Repercussions

Trump’s repeated warnings to Iran—that the United States will launch a military strike if peaceful protesters are killed—come as the president escalates his assault on the post-World War II global order. This marks a striking display of American power, including demanding Venezuela’s oil after Maduro’s detention and threatening to seize Greenland from Denmark, a NATO ally.

Israel, which launched U.S.-backed strikes on Iran during a 12-day war in June, is in close contact with European governments regarding the situation on the ground, a senior European official said, requesting anonymity due to the sensitivity of the talks.

The official added that should the regime fall, it would be a blow to Russian President Vladimir Putin, who would lose another foreign ally after Maduro this month, and after the overthrow of Bashar al-Assad’s regime in Syria just over a year ago.

Oil Stakes and Calls for Strikes

The stakes are high for oil traders. It remains unclear whether the oil-producing Khuzestan province has experienced disruptions, and there are no indications yet of declining crude exports.

On Saturday, Reza Pahlavi, the exiled son of the former Shah and a self-proclaimed opposition leader in the United States, called on oil workers to strike. Oil strikes in 1978 were among the fatal blows to his father’s regime due to their direct impact on the economy.

“The market’s focus has now shifted to Iran,” said Arne Lohmann Rasmussen, chief analyst at AS Global Risk Management, which helps clients manage energy market volatility. He added, “There is also growing market concern that the U.S., with Trump at the helm, might use the chaos to try and topple the regime, as we saw in Venezuela.”

Scenarios of Collapse and Surrounding Risks

The White House is buoyant after the tactical success of the operation against Maduro, as well as Trump’s decision to bomb Iranian nuclear facilities. U.S. officials are also increasing pressure on Denmark to cede control of Greenland, signaling the administration’s appetite for further foreign interventions.

Despite all the risks, Trump might be inclined to attempt to overthrow a government that has been a fierce adversary of the United States and Israel for more than 45 years.

“The balance of power will change dramatically,” said veteran emerging markets investor Mark Mobius, discussing the repercussions of an Iranian regime collapse. He added, “The best-case scenario is a complete change in government. The worst-case scenario is continued internal conflict and the current regime remaining.”

Trump has consistently opposed U.S. interventionism in the region, where the overthrow of Saddam Hussein in Iraq unleashed a wave of chaos and terrorism, costing hundreds of thousands of lives and trillions of dollars.

This potential power vacuum is precisely what worries Arab leaders in the Gulf Cooperation Council (GCC), according to regional officials. Although GCC states often viewed Iran as an adversary, its members have worked in recent years to improve relations and ease tensions, seeking to contain regional escalation and avoid any potential military repercussions between Tehran and the United States or Israel. The specter of the “Arab Spring,” when regimes fell across the region and chaos ensued, remains a potent memory.

Iran has warned that if attacked, U.S. assets in the region—where it has deep commercial ties and tens of thousands of stationed soldiers—as well as Israel, would be “legitimate targets for us.”

Regime Weakness and Future Probabilities

Iran has been severely weakened over the past two years by a stagnant economy, rampant inflation, and Israeli strikes on Iranian or allied targets.

However, it still possesses a large and sophisticated arsenal of ballistic missiles capable of striking targets across the Middle East, from military bases to oil facilities. The regime also retains the support of multiple security agencies, including the pivotal Revolutionary Guard.

For GCC countries, Turkey, and Pakistan, chaos in Iran represents the worst-case scenario, according to Ellie Geranmayeh, Deputy Director of the Middle East and North Africa Program at the European Council on Foreign Relations.

The likelihood of chaos increases given the broad diversity among Iranian protesters, who include segments from secular elites to religious conservatives and lack a unified leader.

Geranmayeh stated that with the GCC’s reconciliation with Tehran over the past few years, there is a sense that dealing with a familiar, albeit adversarial, regime is better than sliding into complete chaos or the emergence of an unknown and unfamiliar authority.

There are also fears that U.S. and Israeli strikes could strengthen the government and diminish the appeal of the protest movement. In June, nationalism surged in the country following Israeli and U.S. bombing.

Regime’s Future by 2026

According to Dina Esfandiary, a Middle East analyst at Bloomberg Economics, Iran is unlikely to remain in its current configuration by the end of 2026.

The most probable scenario, she states, is a leadership reshuffle that largely preserves the regime, or a Revolutionary Guard-led coup. This could mean greater social freedom but less political freedom and a more militarized foreign policy, especially if power shifts to generals rather than clerics.

She added that the chances of a revolution remain relatively low. “Collapse seems unlikely for now. Iranians fear chaos after seeing the destruction it wrought in neighboring Iraq and Syria. More importantly, the government is waging a harsh crackdown.”

Supreme Leader’s Hardline Stance

On Sunday, President Masoud Pezeshkian, a former heart surgeon considered moderate compared to others at the top of the power hierarchy, adopted a conciliatory tone, offering condolences to families affected by the “tragic repercussions.” He stated on state television: “Let us sit together, hand in hand, and solve the problems.”

Many protesters are unlikely to believe him. The Supreme Leader, a far more influential figure, along with elements of the security forces, are growing more hardline, brandishing the death penalty and asserting their readiness to respond with excessive force, as they always have.

“I don’t think a regime collapse will be smooth,” said Asher, the former CIA analyst.

He added, “In the short term, I can imagine a country splitting with ethnic minority groups and some regions seeking autonomy away from Tehran. The Revolutionary Guard will fight fiercely to save the regime, so I think there’s a high probability of widespread violence.”