Nouriel Roubini on BizNews: Iran’s Regime is heading towards collapse. Here’s why.

Key topics:Israel attacked Iran’s nuclear sites amid threats from Iran-backed proxies and regional tensions.Iran’s regime is weakening economically and militarily, risking collapse and potential regime change.Global markets see limited impact on oil and economy despite Middle East conflict escalation..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Nouriel Roubini*.New York – Last November, I predicted that Israel was likely to attack Iran’s nuclear and other military facilities, even go so far as to eliminate the “regime’s top military and political leaders.” I also argued that “any US administration would inevitably continue to support [Israel], directly or indirectly.”Regardless of the deep divisions within Israel about the conduct of war in Gaza, the broad consensus across the Israeli political spectrum – including center-left critics of Prime Minister Binyamin Netanyahu – was that Iran was close to developing a nuclear weapon, a perceived existential threat to Israel. If anything, moderate centrist leaders such as Benny Gantz and Yair Lapid criticized Netanyahu for being soft on Iran.It was only matter of time before Israel struck Iran, which, starting on October 7, 2023, had unleashed Hamas, Hezbollah, Yemen’s Houthis, and Shia militias in Syria and Iraq against Israel. After Israel decimated these proxies and Iran lost strategic deterrence, Iran’s only option was to gain nuclear weapons, an unacceptable outcome for Israel and the West more broadly. Thus, Israel’s attack against Iran. And since some of Iran’s hardened nuclear facilities were robust enough to withstand Israeli weapons, it was clear that the US would intervene to destroy the nuclear facilities, despite the anti-interventionist sentiment of President Donald Trump’s base.Iran counterattacked Israel with missile barrages and now threatens US forces in the region. But the regime is so weakened that it can barely defend itself, let alone unleash its limited weapons against US forces. Yes, some Shia militias can try to attack well-defended US bases and troops in the region. But, leaving aside the risk of even more forceful US and Israeli counterattacks, the damage they can do is limited.Also, the Iranian regime’s ability and willingness to block the Strait of Hormuz, to mine the Persian Gulf, and/or to attack the energy production facilities and pipelines of its Arab neighbors is now limited. The regime is focusing on its survival, but its collapse is likely in the coming months.True, for now Israel’s attack has led even the anti-regime opposition to rally around the flag. Over time, however, a large majority of Iranians who despise a regime that has brought about the country’s economic and financial ruin – and now its geopolitical and military collapse – will rise against it and replace it with something else. In 1990, Iran’s per capita GDP was almost equal to that of Israel; today, Israel’s is nearly 15 times higher. Iran’s energy reserves rival, or even exceed, Saudi Arabia’s, yet it has lost hundreds of billions of dollars in potential energy revenues in a futile war against the West over the past five decades.Today, Iranians face skyrocketing inflation, collapsing real incomes, mass poverty, and even hunger not because of US and Western sanctions but because of their rulers’ nonsensical policies. A country that could have been richer than any Gulf oil state is near bankruptcy, owing to the regime’s corruption, incompetence, and strategic recklessness..Read more:.Iran’s nuclear sites smashed as US strikes ignite global tensions - Mills/Hartley.In addition to being a curse to its own people, the Islamic Republic has financed terrorist groups in the Middle East for decades and has caused state failure or semi-failure across the region: in Yemen, Lebanon, Syria, Gaza/Palestine, Iraq. Stabilization and recovery of failing and failed states in the Middle East now requires regime change in Iran. The Iranian people – not outside forces – will trigger it in the next year. Iranians have revolted against their regime at least a half-dozen times in the last few decades, and, when given the chance, they have always chosen moderate leaders over theocratic zealots.For now, financial markets are correctly betting that the global impact of this recent war is likely to be minimal. Current movements of oil prices, US and global equities, US and global bond yields, and currencies suggest that a major stagflationary shock coming from a severe disruption of production and energy exports from the Persian Gulf remains only a tail risk, not the baseline scenario.The 1973 Yom Kippur War and Iran’s Islamic Revolution in 1979 led to a massive spike in oil prices that fueled the severe stagflations of 1974-75 and 1980-82. This time is likely to be different for many reasons: the energy input in consumption and production in oil-importing economies is much lower than in the 1970s; the US and other major new non-OPEC energy producers have emerged; Saudi Arabia and others are able to tap large excess production capacity and inventories.And in case oil prices rise as US involvement in this war creates new risks, a variety of macro policies and other tools can be used to reduce the stagflationary impact.A nuclear Iran would have been a threat not just to Israel but all Sunni regimes in the Middle East, as well as nearby Europe and eventually the US. German Chancellor Friedrich Merz said what many other world leaders think but don’t want to admit in public: “Israel is doing the dirty work for all of us.” Even China and Russia – Iran’s de facto allies – have shown restraint.Radical forces have destabilized the Middle East for decades, with spillover effects – via terrorism, state failure, and mass migration – on Europe and the West. It now took Israel to weaken and then destroy the Shia radicals and their proxies.Regime collapse in Iran, it should be hoped, will boost stability and allow for reconstruction in the region, with normalization of diplomatic relations between Israel and Saudi Arabia. A new government in Israel more open to peace with the Palestinians and an eventual two-state solution will then be possible. But for that to happen, the Iranian Hydra needs to be replaced with a rational regime eager to rejoin, rather than attack, the international community..*Nouriel Roubini, a senior adviser at Hudson Bay Capital Management LP and Professor Emeritus at New York University’s Stern School of Business, is the author, most recently, of Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, 2022). Copyright: Project Syndicate, 2025.www.project-syndicate.org

Nouriel Roubini on BizNews: Iran’s Regime is heading towards collapse. Here’s why.

Key topics:

Related Stories