War, diplomacy, or revolt: What comes next in Iran?

Executive summary: Iran is at a critical crossroads as widespread protests and a severe government crackdown have heightened fears of escalating conflict, with the United States imposing new sanctions and diplomatic efforts intensifying to avert further violence. The streets of Iran have grown quiet following a week of the largest nationwide demonstrations in years, subdued by force from security forces. One Tehran resident likened the mood to the days around Nowruz, the Iranian New Year, but without festive cheer, describing an eerie silence. The protests, which began as economic grievances, swiftly evolved into calls for regime change, with chants against the dictatorship and some advocating for the return of Reza Pahlavi, the exiled son of the last Shah. The crackdown has been brutal, with reports indicating nearly 3,000 deaths since the unrest began, according to human rights groups. Security forces have used live ammunition and, in instances such as attacks on hospitals in Ilam Province, fired tear gas and assaulted patients and medical workers. The Iranian regime, weakened by recent conflicts with Israel and the U.S., has responded with unprecedented violence, including a digital shutdown that has isolated Iranians globally. In response, the U.S. took decisive action on January 15, 2026, with the Treasury Department announcing sanctions against key Iranian officials involved in the crackdown, including Ali Larijani, Secretary of the Supreme Council for National Security, who called for violence against protesters. The sanctions also target shadow banking networks that launder revenue from Iran’s natural resources, funds used to finance repression and support terrorist groups abroad. Diplomatic efforts are underway to prevent military confrontation. U.S. President Donald Trump has threatened strikes but recently indicated a pause, citing information that killings have stopped. Gulf states like Qatar, Oman, Saudi Arabia, and Egypt have urged the U.S. to avoid attacks, warning of regional security risks. However, the U.S. military is moving a carrier strike group to the Middle East, signaling that escalation threats persist. Experts warn that the social contract between the Iranian regime and its people is irreparably broken. The state’s use of violence has damaged its legitimacy, and many Iranians demand fundamental change. However, the opposition remains fractured, with exiled figures like Reza Pahlavi struggling to build a cohesive coalition, and internal change is more likely to emerge from within the regime’s own structures. The implications are significant: if diplomacy fails, the region could face a new war, with Iran’s nuclear program and support for proxies like Hamas and Hezbollah at stake. The regime’s survival depends on navigating both internal dissent and external pressure. For now, de-escalation is the focus, but underlying tensions suggest protests may re-emerge, keeping Iran poised between revolt, diplomacy, and potential conflict.