What’s next and what does it mean for the world?

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

Iranian state media confirmed that Khamenei was killed in a joint military strike by Israel and the United States. At the time of his death, 86-year-old Khamenei was in his office at his residence, Iran’s Fars news agency said in a telegram.

Khamenei assumed power after the death of Ayatollah Ruhollah Khomeini in 1989, inheriting a revolutionary state that was still consolidating itself after the Iran-Iraq War.

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

Just a few months before Khamenei’s death, the constitution was revised to state that the leader should only be an expert in Islamic jurisprudence with political and managerial competence — a change that allowed Khamenei’s elevation.

Over time, the office of the Supreme Leader consolidated power over Iran’s major institutions. When the president changed through elections, Khamenei retained control over the military, judiciary, state broadcasting, and key strategic decisions (Article 110).

Khamenei championed a “resistance economy” to promote self-reliance amid Western sanctions, was wary of engagement with the West and brushed off critics who argued his security-first approach stifled reform.

His reign faced repeated trials. In 2009, mass protests over allegations of electoral fraud were met with harsh repression. In 2022, demonstrations broke out over women’s rights. A serious challenge emerged in late December 2025, when economic grievances turned into nationwide unrest, with some protesters openly calling for the overthrow of the Islamic Republic.

“Khameni has passed away. It’s the best day of my life. It’s a wonderful day for Iran,” said Masoud Ghodrat Abadi, an Iranian engineer in the United States who left Iran at the age of 27.

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

A similar sentiment emerged on social media platforms after his death, where Iranians took to the streets to celebrate, according to the New York Times.

Analysts, however, cautioned that cheerfulness does not equal transformation.

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

Khamenei’s death will lead to only the second leadership transition since the 1979 Islamic Revolution, which the CFR described as historically significant but deeply uncertain in its outcome.

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

“Leadership change in Iran can take three primary trajectories—regime continuity, military takeover, or regime collapse,” reports the CFR. However, the think tank cautioned that “none” of these near-term scenarios foresee a positive transformation within a year or so of transition.

In an outcome of continuity, essentially “‘Khameni without the Khamenei-ism,'” investors and families may still face uncertainty as the new leader will have to “learn on the job” as he tries to shape economic policy with limited resources and intensifying pressures.

A shift towards a strong military hegemony does not mean economic reform: the CFR suggests that a security-led model can talk about stability and economic management, but still struggle against what it calls a “deeply distorted economy” with “persistent inflation and a depreciating currency”.

Marko Papic, chief strategist of the Clocktower Group, echoed a similar stance: “Iran’s economy will soon become a parking lot if the next Supreme Leader is not more amenable to negotiating with the US.”

If the Supreme Leader is appointed another hardliner who is unwilling to negotiate with the US and continues to attack the region, US military operations will be punitive and “Iran will return to the medieval era,” he said.

Keith Fitzgerald, managing director of Sea-Change Partners, puts it more clearly.

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

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

Importing a political figure from abroad, a restored monarchy or another alternative “has limited credibility on the ground and risks repeating previous experiments with parachute elites that ended badly elsewhere,” he said.

Iran’s opposition in exile is diverse but deeply fractured. It includes royalists aligned with Reza Pahlavi, the US-born son of the late Shah, who was in exile after the 1979 revolution; Republican and secular-democratic activists scattered across Europe and North America; Kurdish opposition groups operate 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 in Iran.