Abstract
The Islamic Republic of Iran finds itself at a precarious juncture. External military pressure, a crippling sanctions regime, and deep internal fractures have converged to create a crisis that challenges the very foundations of the regime. This article examines the interplay between Iran's nuclear ambitions, its regional proxy network, and the domestic political dynamics that have shaped its response to escalating confrontation with the United States and Israel. Drawing on analysis from the 2025-2026 period, the article argues that Iran's leadership is divided less over the principle of regime survival than over the tactics required to achieve it—a division that has been exposed by the wartime killing of Supreme Leader Ali Khamenei and the emergence of a more opaque, militarised decision-making structure. The article further examines Iran's shifting relationships with regional and global powers, the economic impact of sanctions, and the prospects for either diplomatic resolution or further escalation.
1. Introduction: A System Under Strain
When the United States and Israel launched military strikes against Iran's nuclear facilities in June 2025, few anticipated the chain of events that would follow. The strikes did not merely degrade Iran's nuclear infrastructure; they triggered a conflict that would claim the life of Supreme Leader Ali Khamenei, empower a more hardline military leadership, and fundamentally reshape the regional security architecture . By the time a fragile ceasefire was brokered in June 2026, the Islamic Republic had been transformed—not necessarily in its ideological commitments, but in its internal power structures and its approach to survival.
The war exposed a contradiction that had long lurked beneath the surface of Iranian politics. On one hand, Iran's system of clerical rule, with its network of revolutionary institutions and its capacity for coercion, proved remarkably resilient. On the other, it revealed deep fissures: between those who saw negotiation as a necessary tool for economic relief and those who viewed any compromise as betrayal; between the Revolutionary Guards and the civilian government; and between a leadership that had lost its ultimate arbiter and a society increasingly alienated from the regime .
This article traces the contours of this crisis. It examines Iran's nuclear programme and the sanctions regime that has sought to constrain it; it analyses the regional proxy network that has been Iran's primary instrument of power projection; and it explores the domestic political dynamics that have shaped, and been shaped by, the external pressures. The argument is straightforward: Iran's leadership is divided over tactics, not survival, and the wartime context has empowered those most committed to coercion over compromise.
2. The Nuclear Programme: Ambition and Constraint
2.1 From Civilian Energy to Strategic Leverage
Iran's nuclear programme has been a source of international tension for over two decades. What began as a civilian energy project under the Shah evolved, after the 1979 revolution, into a strategic asset that Tehran has used to enhance its regional standing and, many suspect, to develop the capability to produce nuclear weapons. The International Atomic Energy Agency (IAEA) has documented Iran's enrichment of uranium up to 60% purity—just short of weapons-grade levels—a fact that has alarmed Western governments and Israel alike .
The June 2025 strikes by the United States and Israel, which targeted Iran's main nuclear facilities at Natanz and other sites, represented the most significant military blow to Iran's nuclear programme to date . Yet the impact has been ambiguous. While the strikes degraded Iran's infrastructure, they did not eliminate its capacity to rebuild. In fact, reports suggest that Iran has increased construction at a mysterious underground site known as Kuh-e Kolang Gaz La, or Pickaxe Mountain, where engineers have been tunnelling into the Zagros mountain range—raising suspicions that Tehran may be cautiously rebuilding its capabilities .
2.2 The Sanctions Regime: Snapback and Economic Pressure
The United Nations Security Council's decision to reimpose sanctions on Iran through the "snapback" mechanism, included in the 2015 nuclear deal, has added further pressure . The decision, which took effect in September 2025, again froze Iranian assets abroad, halted arms deals with Tehran, and penalised any development of Iran's ballistic missile programme . Iran's president called the decision "unfair, unjust and illegal," but the UN Security Council rejected a last-ditch effort—supported by China, Russia, Pakistan, and Algeria—to delay the reimposition .
The European Union has also adopted extensive sanctions in response to Iran's actions, whether for human rights violations, threats to regional security through its ballistic missile and nuclear programmes, or its support for armed groups in the Middle East . As the EU's High Representative stated in February 2026, the bloc will "continue to protect EU security and interests, including through additional sanctions" .
The economic impact of these sanctions has been severe. Iran's economy, already battered by years of restrictions, has faced restricted exports, frozen funds, and the disruption of critical waterways like the Strait of Hormuz . The reopening of Hormuz, which was central to the June 2026 ceasefire memorandum, is seen as vital to stabilising energy markets and providing some relief to the Iranian economy .
3. Regional Proxies and Power Projection
3.1 The Axis of Resistance: A Network Under Duress
Iran's regional strategy has long relied on a network of allied militias and political groups—the "Axis of Resistance"—that includes Hezbollah in Lebanon, Hamas in Gaza, the Houthis in Yemen, and various Iraqi armed groups . These proxies have served multiple purposes: they project Iranian power beyond its borders, they deter direct attacks on Iran, and they provide Tehran with plausible deniability for actions that might otherwise provoke a direct response.
Yet this network has been severely degraded. Israel's military campaigns against Hamas and Hezbollah have ground down two of Iran's most formidable allies. The weakening of these proxies has left Iran more exposed and has diminished its ability to respond to the U.S.-Israeli strikes without risking direct confrontation . As the NATO Parliamentary Assembly's report noted, Tehran's "ability to project power across the region is dwindling significantly" .
3.2 The Strategic Calculus of the Gulf States
Perhaps the most significant regional shift has been the response of the Gulf Arab states. Whereas a decade ago many Arab leaders might have welcomed a war to change the regime in Tehran, by the time the conflict started, most had made their peace with Iran . The UAE restored diplomatic ties with Iran in 2022; Saudi Arabia signed a formal normalisation agreement brokered by China in 2023 .
The reasons for this shift are not difficult to discern. The Gulf states have concluded that they have too much to lose in a conflict with Iran. The UAE and Saudi Arabia are both pursuing hundreds of billions of dollars of investment in data centres and financial services, which require stability to reassure investors . They also witnessed the failure of the Trump administration to robustly respond to Iranian attacks in 2019, leaving them sceptical of U.S. willingness to protect them .
The Iran war has exacerbated divisions among Gulf countries. The UAE was struck by over 3,000 missiles and drones—more than all other GCC states combined—and has emerged from the conflict determined to ensure Iran pays a high price for its attacks . It has deepened its military and intelligence ties with Israel, including reportedly receiving an Iron Dome battery. Saudi Arabia, in contrast, has distanced itself from Israel, engaging in diplomatic efforts to end the war . This divergence has complicated efforts to forge a united Arab front on everything from energy policy to relations with the United States.
4. Domestic Politics: Factional Warfare Behind the Scenes
4.1 The Death of Khamenei and the Rise of Mojtaba
The killing of Supreme Leader Ali Khamenei, whose age and declining health had long been a subject of speculation, represented the most significant internal shock to the Islamic Republic since the 1979 revolution . Khamenei's death removed the figure who had served as the ultimate arbiter of factional disputes for over three decades. His son, Mojtaba, has succeeded him, but he has not yet performed the role his father played: appearing publicly, speaking directly, ending factional arguments, and signalling the final line of the state .
This absence matters. Power has moved into a less visible, more militarised structure: a security-led order shaped by overlapping circles that compete, cooperate, and distrust one another . One circle is the older intelligence-security network around Mojtaba, including figures like Hossein Taeb (former head of the IRGC Intelligence Organization) and Mohammad Ali Jafari (former IRGC commander). Another is closer to the negotiation-facing track, including President Masoud Pezeshkian and Foreign Minister Abbas Araghchi. A third appears closer to direct military and security decision-making, led by IRGC Commander Ahmad Vahidi and Mohammad Bagher Zolghadr, who now heads the Supreme National Security Council .
4.2 The Ultraconservatives: War, Not Talks
The ultraconservative political movement, represented by the Jebhe-ye Paydari (Stability Front) and their allies, has emerged as a significant force in the wartime context . Many of them are the more extreme members of the IRGC, willing to use military coercion more than previous generations of leaders. They oppose any negotiations with the United States, let alone compromising over issues such as control of the Strait of Hormuz or Iran's nuclear programme .
Their influence extends beyond parliament to the IRGC, judiciary, and Supreme National Security Council . The recently appointed Council chief, Zolghadr, is an IRGC veteran whose willingness to preserve the system through coercion, control, and military escalation appears to have few limits . Chief Justice Gholam-Hossein Mohseni-Ejei has overseen a wartime crackdown on dissent, resulting in the executions of several people convicted of participating in anti-government protests .
Yet the ultraconservatives should not be treated as a simple, unified faction. They are divided amongst themselves, and their influence should not be overstated. As one analyst observed, "They're making quite a lot of noise. But in the actual decision-making arena, hardliners rarely get what they want" . If Iran's main centres of power reach consensus on a deal, "it is not clear how much radical figures such as Saeed Jalili can actually do to derail it" .
4.3 The False Choice: Bad, Worse, and the Politics of Leverage
The rift within the Iranian leadership is real, but it should not be mistaken for an opening. It is not a contest between democrats and authoritarians; it is not proof that Iran has a liberal faction waiting to be empowered; it is not even a simple split between the IRGC and the civilian state, because the so-called civilian figures operate inside a system shaped by the Guards, the Supreme Leader's office, and the security state . The split is between factions of the Islamic Republic arguing over how best to preserve the system.
Washington has seized on this. Secretary of State Marco Rubio drew a distinction between hardliners who understand they still have to run a country and an economy, and those "completely motivated by theology." The harder core, he said, includes the IRGC, the Supreme Leader, and the council around him. "Unfortunately," Rubio added, "the hardliners, with an apocalyptic vision of the future, have the ultimate power in that country" . Trump has used harsher language, saying Iran's government is "seriously fractured" and its leaders are struggling to figure out who is in charge .
5. The War and Its Consequences
5.1 The Military Dimension
The US-Iran conflict has followed a recurring pattern exhibited in past U.S. attempts at regime change: sowing regional chaos, undermining U.S. soft power and alliances, and unexpectedly empowering adversaries . The Trump administration set out to change the Iranian regime, decimate Iran's nuclear program, degrade Iran's armed forces, help Iranian protesters, and demonstrate American power. It ended up making little progress on most of those goals but instead gave Iran unprecedented control over the Strait of Hormuz, severely undermined U.S. soft power and alliances, and replaced a cautious, elderly, and unpopular supreme leader with a vengeful, hardline, and more mistrustful military-dominated regime .
The June 2026 ceasefire memorandum, which opened a 60-day window for negotiations, has been described as a "breakthrough" by Washington and Tehran, but disagreements persist over sanctions relief, frozen assets, nuclear inspections, and Lebanon's future . The agreement contains no provisions on regime change, no commitment by Iran to dismantle its ballistic missile programme, and no immediate surrender of its enriched uranium stockpile . It does, however, create a path for reopening the Strait of Hormuz and brings Iran back to the negotiating table—both significant achievements, though provisional ones .
5.2 The Regional Impact
The war will likely have significant consequences for the region. By revealing the United States to be an unpredictable, unreliable partner, which rejected regional calls to avoid war and thereby inflicted major damage on the Gulf states, the war will lead U.S. regional partners to pursue more national self-reliance and diversify their international partnerships . The Gulf states will also worry that even if Trump is replaced by a less unpredictable Democratic president, the latter may not be as sympathetic to them .
This does not mean that the Arab Gulf states will cease relying on the United States, which has too much to offer in terms of investment, defence equipment, and political support. But they are likely to increase defence spending and hedge against U.S. unreliability by diversifying spending in the direction of other potential suppliers, such as Europe, South Korea, and Australia . They will also invest in alternative export routes via new pipeline networks to reduce reliance on both the Strait of Hormuz and the American military's willingness and ability to keep it open .
5.3 The International Dimension
Iran's relationships with its international partners have been tested by the conflict. Despite long being treated as a pariah by the West, Iran maintained diplomatic, commercial, and military ties with a range of countries: Turkey and India on trade and security; China for cheap oil; North Korea, Venezuela, and Russia as allies in their struggle against the West . Yet those friends, neighbours, and partners have had little more than words to offer the Islamic Republic . As The New York Times observed, "Without true allies, it is a lonely war for Iran" .
This is a product, experts say, of Iran's foreign policy, which has shied away from commitments to other countries while investing in militias that share its religiously-fueled hatred of the United States and Israel . Those militias can't help Iran now; they have been ground down by wars with Israel. The Houthis in Yemen and Iraqi armed groups can target ships in the Red Sea or American forces in Iraq, but such attacks are unlikely to change the course of a war inside Iran .
6. Conclusion: A System in Flux
The Islamic Republic of Iran is not about to collapse, but it is also not the same entity it was before the war. The killing of Khamenei, the empowerment of the ultraconservatives, the degradation of Iran's nuclear programme and proxy network, the deepening sanctions, and the fractures within the Gulf cooperation system have all contributed to a fundamental transformation.
The coming months will be decisive. The 60-day ceasefire window presents a narrow opportunity for diplomacy—an opportunity that could either lead to a broader, durable final agreement or collapse into renewed conflict . The issues at stake are immense: the fate of Iran's nuclear programme, the reopening of the Strait of Hormuz, and the shape of the regional security architecture.
What is clear is that the Iranian leadership is divided over tactics, not survival. The split between those who see negotiation as a necessary tool and those who view compromise as betrayal is real, but both camps are committed to preserving the Islamic Republic. The challenge for Tehran is to manage these internal divisions while navigating an external environment that has become more hostile, more complex, and more unpredictable.
The storm-tossed ship may yet find calmer waters. Or it may founder on the rocks of its own contradictions. Either way, the outcome will shape the Middle East for decades to come.
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