Iran at a domestic stalemate as it seeks to end ‘neither peace nor war’

The open discussion points to the extent to which the Islamic Republic feels pressure.

By Shay Khatiri, Middle East Forum

On September 8, 2025, the late Supreme Leader Ali Khamenei remarked that the “neither peace nor war” condition that “the enemy has imposed on us” was dangerous for the country.

The phrase rose to prominence in the aftermath of the joint U.S.-Israel operation that began on February 28, 2026.

Khamenei’s phrasing refers to the situation in which Iran suffers economic and societal pressures while it simultaneously faces the threat of war.

The Iranian side views this as both material and psychological pressure. After Khamenei used the term, journalists and intellectuals elaborated on it, and they proposed solutions, such as self-sufficiency.

Since the recent conflict, lower-level officials and journalists again began discussing the term. Now, the highest levels of power are again doing so as well.

Supreme Leader Mojtaba Khamenei has spent most of his tenure as the new supreme leader missing, perhaps because he was maimed, if not worse, in the strikes that killed his father, or because he fears the United States or Israel will target him if they learn his location.

In recent weeks, he has assumed more governing responsibilities. According to press reports, he has met with the heads of the three branches and Mohsen Rezaei, the secretary of the Supreme National Security Council.

Mojtaba reportedly told Rezaei on October 28 that the Supreme National Security Council should influence “four measures”—namely, “culture, politics, economy, and security.”

He reiterated that Iran should operate the Strait of Hormuz and have bilateral relations with neighboring states. He emphasized that the authorities should work to end the “neither peace nor war” condition.

Khamenei and Rezaei, possibly the two most important officials in the regime, discussed the dilemma only five days after President Masoud Pezeshkian said that “neither peace nor war has caused many people to struggle to find food.”

He pointed to the naval blockade on Iran and added, “I believe that we should exit this situation, too.”

The open discussion points to the extent to which the Islamic Republic feels pressure.

Average Iranians wonder when the war will resume. Businessmen hold off on investments.

After a brief decline in inflation, the Central Bank of Iran reported last month that the rate was peaking again at an annual 89.8 percent in the Iranian month of Shahrivar [August 23 to September 22].

Johns Hopkins University economist Steve Hanke estimates Iranian inflation to be closer to 158 percent.

According to a September 3 report, 290,000 labor workers registered for unemployment benefits because of the war’s destruction.

Civilian government employees likewise struggle to meet ends. The most important question is the financial condition of the security personnel.

Iranian decision-makers remain undecided about the regime’s way out of the problem.

After his appointment, Rezaei emphasized national unity, pointing to his worries about another uprising.

Pezeshkian, who has proven to be a capable politician, continues to defend the Memorandum of Understanding.

He has not personally called for a diplomatic settlement, but his reformist surrogates vocally advocate for a grand bargain with the United States, some even going further to suggest a referendum over the direction of the regime.

Speaker Mohammad Bagher Ghalibaf said on September 12, “We will both fight and negotiate,” whichever is necessary—a statement that reflects policy as much as political coalition management.

Meanwhile, on October 25, Foreign Minister Abbas Araghchi, who speaks for the security establishment, dismissed fears of war, saying that Iran will not change its policies either way.

Under Ali Khamenei, stakeholders debated different ways forward, and the supreme leader played the referee if his subordinates failed to reach a consensus.

Whether his son will continue the tradition remains to be seen, but everyone appears to agree that the current situation is unsustainable.