Iran ends its worst year and enters an uncertain future

Tensions between Iran and the United States have risen sharply since Donald Trump re-entered the Oval Office on 20 January, presenting multiple risks of escalation.

A key deadline in October 2025 looms over whether European countries will trigger the snapback mechanism to re-impose United Nations sanctions removed as part of the Iran nuclear deal in 2015.

Indications, not least by President Trump himself, that he would like to negotiate a new agreement to address Iran’s rapidly-advancing nuclear program, have been offset by his administration’s restoration of its ‘maximum pressure’ policy on Iran.

Trump’s transactional nature and unconventional style of decision-making means nothing can be ruled out in a high-stakes confrontation without a clearly-defined plan. 

Caught in the middle are Iran's Arab neighbours, where large-scale projects aimed at future-proofing economic development and growing non-oil sectors would be jeopardized by any conflict involving Iran.

‘De-risking’ has become a mantra in Arab capitals and particularly in Riyadh as the landmark year of 2030 draws closer and as the ‘giga-projects’ associated with Vision 2030 move into construction and delivery phases.

Qatar this month called for a diplomatic solution to the US-Iran standoff over Tehran's nuclear program and argued against military action.

The desire to reduce exposure to regional volatility has been evident in the process of rapprochement with Iran since 2020, with Saudi Arabia, the UAE, and Kuwait restoring full diplomatic ties with Tehran in 2022 and 2023 and maintaining regular dialogue on key issues of interest.

This was evident in regional responses to the war in Gaza after 7 October 2023 as the conflict did not regionalize, in part because there was little appetite in any capital on either side of the Persian Gulf for any escalation. 

Excluded once, not twice

Back in 2015, officials in some Arab capitals and also in Israel expressed frustration that they were not included in the negotiations between Iran and the P5+1 that culminated in the signing of the Joint Comprehensive Plan of Action (JCPOA), from which Trump’s first administration withdrew in 2018.

In 2020, Saudi leaders called on the incoming Biden administration to consult with them as it sought to revive the Iran deal and explore an expanded ‘follow-on’ agreement, which ultimately did not happen.

As the indirect talks between US and Iranian officials broke down in 2022, the role of Iran's neighbouring Arab countries became more central to keeping open channels of communication between the parties. 

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Oman and Qatar, along with Kuwait, have long played roles in diplomacy and mediation in regional affairs, as they generally maintained pragmatic working relationships with Iran which, in the Qatari case, included one of the world’s largest reservoirs of natural gas which straddled their maritime boundary.

Officials in Oman placed a premium on balancing relationships with regional partners and being able to utilize their ability to engage with adversaries to address flashpoints and minimize their threat to regional security.

Prior to their passing in 2020, both Sultan Qaboos of Oman and Emir Sabah of Kuwait had well-earned reputations as diplomatists par excellence borne out of decades of involvement in regional affairs.

An example of their efforts to reduce tensions was seen in early 2017 when Emir Sabah sent a letter to Iran’s then-president, Hasan Rouhani, to establish a basis for dialogue after tensions had soared in 2016. Rouhani responded by visiting Kuwait and Oman and Emir Sabah then traveled to Muscat to meet with Sultan Qaboos to follow up, but the subsequent rift over Qatar put paid to those efforts. 

In 2025, Kuwait is focused on domestic issues and relatively absent from the regional scene, but there is space for Saudi Arabia to play more of an active role than it has in the past and to build upon the progress in the Kingdom’s relations with Iran since ties were re-established two years ago.

Since 2023, the Saudi leadership has been active in regional diplomatic initiatives concerning Syria, Gaza, and Sudan, and has burnished its credentials as an intermediary with convening power across the Arab and Islamic worlds.

In its ongoing facilitation of meetings of Ukrainian, Russian, and U.S. officials, the Kingdom has shown that it has the ability to navigate between adversaries and leverage its growing non-alignment in world affairs.

Securing a seat at the table in the Russia-U.S. talks may be a prelude to inserting Saudi Arabia into the middle of any negotiations between the U.S. and Iran, thereby minimizing the risks of exclusion from the talks, as in 2015, but Iranian officials may still view the Saudis as too close to the U.S. and not impartial. 

The regional mediators of longer standing, Qatar and Oman, are likely to continue to offer their services in relaying messages between the Unites States and Iran and ensuring that opportunities for dialogue remain open, joined by the United Arab Emirates which delivered a letter from Trump to Iranian leaders on 12 March.

Trump redux

Trump’s mercurial approach to policy appears even more unpredictable second time around and has led to whipsaw decisions on tariffs that have added to market uncertainty and left analysts scrambling.

A similar pattern may well overshadow the next phase of the delicate dance between the U.S. and Iran, especially if Trump and Iranian leaders engage in verbal sparring matches of ever-increasing volume.

If this happens, officials in the Gulf States may focus on practical measures to limit the possibility of escalation, whether by accident or design, and identify the parameters of realistic dialogue going forward. 

Taken together, their efforts are illustrative of the prevailing opinion in the region in favor of resolving the standoff between Tehran and Washington, and the depth of Emirati (and Saudi) political and economic relationships in DC may resonate with the Trump White House and its Congressional allies.

While tensions in other parts of the Middle East have soared in the wake of the Gaza war and the degradation of Iran’s ‘axis of resistance,’ the rulers in Riyadh, Muscat or Abu Dhabi are more closely aligned than they were in Trump’s first term, and may thus be better placed to play a proactive and productive role in de-escalatory regional dynamics.

"They keep saying Iran is at a crossroads. Is it really a crossroads if it drags on for years? Because we’ve been here as far as I can remember.” This is Zahra, 36, a legal consultant, almost snapping at me for bringing up this conversation.

"Trump has apparently told Khamenei to make a deal or get ready for war,” she carries on venting. “But I think he’ll dodge this one too, selling out even more to China and Russia, buying time, hanging in there at the so-called crossroads while we sink deeper in the swamp that he’s made.”

Zahra has stopped waiting for a turning point. And she’s not alone. Utter the words breakthrough in a Tehran taxi and you’ll get a bitter smile, if not a scornful look. Why talk or even think about it. As Zahra puts it, "it'll come when it comes."

For years, the government has pinned almost everything on sanctions—runaway inflation, energy shortages, environmental disasters, a failing healthcare system, you name it.

But many have long stopped buying that narrative. They’ve watched billions vanish in case after case of corruption, most involving officials and cronies that somehow always avoid justice.

"I cannot care less about sanctions,” says Mehdi, a salesman turned Snapp driver. “My children suffer with or without sanctions. And the officials’ children thrive with or without sanctions.”

Mehdi is 45, a father of two. His apathy may not help his country’s situation, he says, but at least it helps keep him sane. “I have to have my hands on this fifteen hours a day, six days a week, to make ends meet,” he says, bashing the steering wheel, “so I have no time for love-hate letters between Trump and Khamenei.”

Khamenei’s famous line—neither war nor negotiations—has defined Iran’s foreign policy for years. His recent remarks follow the same logic.

Many in Tehran believe this anti-talks position is why the face of Iranian diplomacy abroad, former foreign minister Javad Zarif, had to resign his role as vice president.

Zarif and his boss, president Masoud Pezeshkian, are clearly in favor of dialogue with the Trump administration, which puts them at odds with Khamenei even if they express their full allegiance at every turn.

Despite widespread apathy, many voted for Pezeshkian because they felt his moderate politics would increase the likelihood of a thaw with the West and potentially less sanctions that could improve their dire economic fortunes.

“If sanctions are lifted, foreign investment will return, and jobs will be created,” says Milad, a 20-year-old undergraduate and a first-time voter for Pezeshkian who sees himself in the minority.

“Most people I know prefer no talks, not because they back Khamenei, but because they hate his guts and think a thaw would help him last longer,” Milad adds. “I think they’re wrong though. Khamenei & co. would do just fine. It’s us who’ll shoulder Trump's maximum pressure.”

Milad thinks talks could potentially lead to less sanctions and improved life. But not many share his view, as he said. That flicker of hope that drove some people to polling stations last year is well and truly dead now.

Majid, a 28-year old street vendor, sums it up succinctly.

"My family was poor when oil money was pouring in, and we’re poor now with the harshest sanctions. We all work 50-60 hours a week just to survive. I can’t see how we’d get out of this."

The Islamic Republic has tied its survival to our destruction. Moderates or hardliners in government, during talks or at war, our suffering is constant," he added.

Majid’s grandfather, Akbar, interjects. He’s sitting on a stool next to his grandson to kill time, in his words.

“We’re screwed either way. So better not to have talks, I say. Any money would just fatten the bandits and thugs that rule us.” And Trump’s letter and ultimatum? “I don’t like bullies,” Akbar says smiling. “But we’re where we are because of Khamenei, not Trump.”

The grandfather may also be in the minority—of those who still follow the news religiously despite grudges. For a majority, as far as I can tell, Trump’s letter, Khamenei’s speeches, the latest threats and ultimatums barely register anymore.

People are exhausted. The news of war or negotiation causes only a brief ripple in the economic mire in which most people are trapped.

And the real question for most is, how much longer can we endure this?

Trump warned on Monday that he would hold Iran and its leadership responsible if its Houthi allies retaliated for dozens of US air strikes on the Tehran-backed group.

The ultimatum followed a demand by the hawkish president the week before that Iran agree to a new nuclear deal or face attack.

Official media zealously swatted away apparently baseless reports circulating on social media on Monday evening that the US military had sunk Iran’s reconnaissance ship Zagros in the Red Sea.

Saberin News, a Telegram channel with nearly a million followers reportedly linked to the Revolutionary Guards, denied on Tuesday the presence of any Iranian navy ships in the Red Sea, Bab al-Mandab Strait and the Indian Ocean.

Iran's national currency plummeted to an unprecedented low on Trump's ominous remarks, with the rial falling past the 1,000,000-per-dollar threshold in the open market.

“The reason for the spike in foreign exchange rates is the US attack on Houthis and the expectation that Iran will be the next target,” Morteza, a businessman in Tehran, told Iran International on Tuesday.

“Interestingly, people are not afraid of war although they think it is inevitable this time. They believe it will only be the government who will bear the brunt of an attack, should it materialize, and that they will come to no harm themselves,” he added.

According to Iranian-Canadian political analyst Shahir Shahidsaless, Trump may be laying the groundwork for military action against Iran if negotiations fail, either due to Iran’s refusal to engage, a lack of flexibility in talks, or if IAEA chief Rafael Grossi’s June report confirms that Tehran is rapidly advancing its nuclear program.

In a post on X on Tuesday, Shahidsaless suggested that the US operation against the Houthis could be a prelude to an attack on the Islamic Republic.

Meanwhile, Nour News, a media outlet close to Iran's Supreme National Security Council suggested on Tuesday that Tehran could withdraw from the Nuclear Non-Proliferation Treaty (NPT) if Trump acts on what it called his "delusion" that Iran seeks nuclear weapons.

A pro-government Iranian Middle East analyst and university lecturer, Mostafa Najafi, claimed in a post on X Monday that the United States has sent a backchannel message to Iran demanding the removal of its military and intelligence ships from the Red Sea and set a deadline.

According to Najafi, Iran has also warned “through its UN mission and at the military level against any American adventurism against its positions, interests, and assets.”

At the UN Security Council Monday evening, Iran's ambassador Amir-Saeid Iravani called Trump’s statements reckless and provocative and warned that any act of aggression against Iran could have severe consequences for international peace and security.

"Iran strongly and categorically rejects any accusation on the violation of relevant Security Council resolutions on arms embargoes in Yemen or involvement in any destabilizing activities in the region," Iravani said on Monday.

Iran and the Houthis have denied close military coordination, but weapons experts have linked the Yemeni fighters' advanced arsenal of anti-ship and ballistic missiles to Iranian technology. Iran has long presented the Houthis as an important part of its so-called "Axis of Resistance" against Israel and the United States.

Isa Bozorgzadeh, spokesman for Iran’s water industry, said on Tuesday that the usable capacity of Karaj Dam near Tehran has dropped to nearly half, much of it rendered useless due to sediment buildup.

“Lar Dam has practically dried up, and Latian, Taleqan, and Mamloo reservoirs are facing a 46% decrease in rainfall compared to the average and 25% compared to last year,” he told ILNA news agency.

Water shortages have triggered growing concerns in recent weeks, particularly in Tehran and Isfahan provinces, where officials have raised the possibility of rationing.

Bozorgzadeh cautioned that Tehran is consuming 50 million cubic meters of surface water each month while the combined reserves of the capital’s five main dams—including dead storage and sediment—amount to just 60 million cubic meters.

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“Conditions have deteriorated to the point where even a motorcyclist could drive through the reservoirs,” he said.

Eastern Tehran’s water and wastewater company reported that Latian and Mamloo dams are each only 12% full, while Lar is down to just 1%. Karaj, a historically stable reservoir, has shrunk to 7% capacity.

Iran’s water supply depends largely on rainfall, snowmelt, and underground aquifers, but decades of over-extraction have left groundwater tables severely depleted. The sharp decline in precipitation—down more than 40% in Tehran province relative to long-term averages—has compounded the problem.

Beyond Tehran, Bozorgzadeh identified Hormozgan, Sistan and Baluchestan, Khuzestan, Kohgiluyeh and Boyer-Ahmad, and Bushehr as regions struggling with a 50% drop in rainfall.

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Government spokeswoman Fatemeh Mohajerani acknowledged the severity of the situation, saying, “A nationwide decrease in average rainfall this year has led to shortfalls as high as 75% in some provinces.”

Iran’s energy ministry reports show that despite lower rainfall, hydropower generation increased by 24% in the fiscal year beginning March 2023, amid the country's energy crisis, reaching 17 terawatt-hours and maintaining that level into the current year.

Dalga Khatinoglu, an oil and gas analyst, suggested the government’s decision to sustain hydroelectric output was a factor in the current crisis.

“Iran failed to achieve its planned growth in thermal and renewable energy, leaving it dependent on hydropower,” he told Iran International. “Over the past two years, the country commissioned just 4 gigawatts of new plants—about 30% of its target—with 90% being gas-fired. The rest came from renewables.”

Hydropower reliance, combined with a persistent drought, has accelerated reservoir depletion, leaving little room for recovery even if precipitation levels were to improve.

Meanwhile, Iranian media has begun to raise alarms about broader implications. Etemad newspaper warned that 2025 could mark a turning point in the country’s water and energy crisis, predicting that shortages could become more severe than any previously experienced. Some hydrologists have cautioned that Iran has used up nearly 1,000 years' worth of groundwater reserves in just three decades.

The currency was trading at one million per US dollar in Tehran on Tuesday as gold prices also rose. This represents a 14,000-fold devaluation of the rial, which had remained stable at 70 per dollar for over a decade before the 1979 Islamic Revolution.

Food inflation, which has averaged 100% in recent months, is expected to reach critical levels in the coming months unless Tehran initiates negotiations with the Trump administration.

The rial, which was valued at around 40,000 per dollar in early 2018, began to plummet after Trump withdrew from the JCPOA nuclear deal in May of that year and imposed tough economic sanctions, pushing inflation above 40%.

Despite long negotiations with the Biden administration in 2021-2022, Tehran did not reach an agreement with the US over reviving the JCPOA and its economic situation continued to deteriorate.

In February, President Trump called for new negotiations, stressing that Iran must not acquire nuclear weapons and vowing to tighten sanctions. So far, Supreme Leader Ali Khamenei has rejected talks, while Iranian officials maintain that Tehran will not negotiate under pressure.

Three days ago, Trump ordered air strikes against the Yemeni Houthis who have attacked international shipping in the Red Sea region and lobbed missiles at Israel. This was seen as a clear warning to Tehran. On Monday, Trump warned Tehran that it will be punished if its allies the Houthis retaliate against a US air assault over the weekend, escalating his rhetoric against Tehran.

"Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN, and IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!" Trump wrote on his Truth Social platform.

As tens of millions of Iranians earn the equivalent of less than $150 a month and inflation is rising, some media outlets and commentators in Tehran have warned of potential unrest.