Prediction Markets See Iran on the Brink

Iranian protests over economic hardships and an end to the country’s theocratic regime took a dark turn over the weekend. During the country’s internet blackout, human rights organizations reported hospitals overwhelmed by body bags and patients killed by live ammunition.

This latest round of protests began over intolerable economic conditions. Its currency has an annual inflation rate of 40%, and Iran ended a subsidy program whose ending will lead to higher food prices. Anti-government protests grew out of these economic complaints. The messaging was coupled with anger over the murder of Mahsa Amini, a 22-year-old arrested for not wearing her hijab properly in 2022.

Kalshi traders give Iran’s leader, Ali Khamenei,  a 64% chance of being “out” as Supreme Leader by September 2026. Meanwhile, there’s a 40% chance that the United States formally recognizes Reza Pahlavi as Iran’s leader this year.

Reza Pahlavi’s possible return to Iran

Pahlavi is the oldest son of the shah who was overthrown in Iran’s Islamic Revolution. He is a long-time advocate for a return to a constitutional monarchy, and has called for a liberal, secular government as recently as 2023.

Still, there is only a 24% chance that he will lead Iran in 2026. He would have to formally establish a government in Iran and regain control of the military.

Those low chances may not stop the United States from recognizing Pahlavi as Iran’s head of state. A U.S. endorsement could be vital if Pahlavi were to regain power in Iran.

Regime allies remain safe

While the Iranian regime is in danger of toppling, its key allies, Russia and China, are likely to remain in power.

Vladimir Putin only has a 14% chance of being ousted this year, while Xi Jinping only has a 7% chance of leaving power. It’s still early in the year but both leaders remain in control of their governments and populations. (Although, a turn in Putin’s war in Ukraine could make his position far less favorable than it is at the beginning of 2026.)

If Iran’s government falls, these two major powers that have found common ground with Iran’s anti-Western positioning will become Pahlavi’s latest adversaries. Pahlavi won’t be a Western liberal as some observers may hope. But few expect him to create an oppressive regime comparable to Russia or China, either.