What’s next and what it means for the country?

The death of Iran’s Supreme Leader Ayatollah Ali Khamenei sets in motion a formal succession process that could have significant implications for the country’s political stability, sanctions outlook and already strained economy.

Khamenei was killed in a joint military strike by Israel and the United States, Iranian state media confirmed. At the time of his death, Khamenei, 86, was at his office within his residence, Iran’s Fars News Agency said on Telegram.

He assumed power following the death of Ayatollah Ruhollah Khomeini in 1989, inheriting a revolutionary state still consolidating itself after the Iran-Iraq war.

Khamenei was not seen as the obvious successor. He lacked the religious credentials required by the constitution at the time, Karim Sadjadpour, a policy analyst at the Carnegie Endowment for International Peace, noted in his study on Khamenei.

Just months before Khomeini’s death, the constitution was revised to state that the Leader needed only to be an expert in Islamic jurisprudence with political and managerial ability — a change that enabled Khamenei’s elevation.

Over time, the office of the supreme leader consolidated authority over Iran’s key institutions. While presidents changed through elections, Khamenei retained control over the military, judiciary, state broadcasting and major strategic decisions (Article 110).

Khamenei championed a “resistance economy” to promote self-sufficiency amid Western sanctions, remained wary of engagement with the West, and cracked down on critics who argued his security-first approach stifled reform.

His rule faced repeated tests. In 2009, mass protests over alleged election fraud were met with a harsh crackdown. In 2022, demonstrations erupted over women’s rights. A serious challenge emerged in late December 2025, when economic grievances spiraled into nationwide unrest, with some protesters openly demanding the Islamic Republic’s overthrow.

“Khamenei is dead. This is the best day of my life. This is a glorious day for Iran,” said Masoud Ghodrat Abadi, an Iranian engineer now based in the United States who left Iran at age 27.

“I believe his death could mark the beginning of a new chapter in our nation’s history … In the long run, I hope this moment will prove transformative,” he told CNBC.

Similar sentiment surfaced across social media platforms following his death, where Iranians were shown to take to the streets, celebrating, according to the New York Times.

However, analysts warned that jubilation does not equal transformation.

“Taking out Iranian Supreme Leader Ayatollah Ali Khamenei is not the same as regime change. The Islamic Revolutionary Guard Corps is the regime,” the Council on Foreign Relations noted following his passing, limiting the prospects for immediate political or economic transformation. 

The death of Khamenei ushers in only the second leadership transition since the 1979 Islamic Revolution, a moment that the CFR described as historically significant but deeply uncertain in its outcome. 

While some Iranians have expressed hope that a leadership change could ease repression and economic isolation, the Council on Foreign Relations said the most likely succession outcomes do not suggest meaningful political or economic liberalization in the immediate aftermath of a transition.

“Leadership change in Iran could take three primary trajectories—regime continuity, military takeover, or regime collapse,” the CFR reported. However, the think tank warned that “none” of these near-term scenarios envisage a positive transformation in the year or so after transition.

In a continuity outcome, essentially “‘Khamenei-ism without Khamenei,'” investors and households may still face uncertainty because a new leader would need to “learn on the job” while trying to shape economic policy with limited resources and intensifying strains.

Even a shift toward firmer military dominance wouldn’t mean economic reform: CFR suggests a security-led model might talk up stability and economic management, but would still struggle against what it calls a “deeply distorted economy” with “persistent inflation and a collapsing currency.”

Marko Papic, chief Strategist of Clocktower Group, echoed a similar stance: “The Iranian economy is soon to be a parking lot unless the next Supreme Leader is more amenable to negotiating with the U.S.”

If the Supreme Leader is replaced by another hardliner who does not want to negotiate with the U.S. and who continues the attacks against the region, then U.S. military operations will become punitive and “Iran will return to the Medieval Age,” he said.

Keith Fitzgerald, managing director at Sea-Change Partners, framed it more bluntly.

“Killing Khamenei is not, in itself, ‘regime change.’ Think of it as changing a light bulb: To change it, you must first remove the broken bulb that was there. But doing so is not changing the bulb. That requires replacing it with a new one,” he wrote in a note.

Additionally, the Iranian opposition in exile remains fragmented and lacks unified leadership, said Ali J.S., a former strategic intelligence analyst at the NATO Joint Warfare Center.

Importing a political figurehead from abroad, whether a restored monarchy or another alternative “has limited credibility on the ground and risks repeating past experiments with parachuted elites that ended badly elsewhere,” she said.

Iran’s opposition in exile is diverse but deeply fragmented. It includes monarchists aligned with Reza Pahlavi, the U.S.-based son of the late Shah who was exiled after the 1979 revolution; republican and secular-democratic activists dispersed across Europe and North America; Kurdish opposition groups operating along Iran’s western borders; and the People’s Mojahedin Organization of Iran (MEK), which maintains an organized political network abroad but has limited credibility inside Iran.