When your currency loses 96% of its value in a month, people tend to notice. That's what happened to the Iranian rial recently, and the resulting protests have turned into the biggest challenge to Iran's Islamist regime since it took power in 1979. The government's response has been brutal, and the international reaction has exposed just how differently the US and Europe think about Iran when energy security enters the picture.

Iranian leader Ayatollah Ali Khamenei's government launched a deadly crackdown against protesters who took to the streets after the rial's collapse. According to CBS News, more than 12,000 people have been killed since the protests began on December 28. Iranian officials dispute that figure, claiming only 5,000 deaths have been verified, Reuters reported on January 19. Either way, it's a staggering death toll.

The Iranian government has made its intentions clear, stating that protesters labeled as "rioters, organizers and leaders of anti-security movements" would be targeted "without leniency."

The Energy Equation Changes Everything

Here's where things get interesting from a markets perspective. Iran produces about 3.3 million barrels of oil per day, making it the fourth-largest producer among OPEC members behind Saudi Arabia, Iraq, and the United Arab Emirates. About 1.3 million barrels of that flows to Chinese refineries every day.

Any serious escalation in Iran could affect global energy markets in a big way. The Strait of Hormuz is the critical chokepoint here, where roughly 20% of global oil supplies pass through from Saudi Arabia, Iraq, the United Arab Emirates, and Qatar. BloombergNEF estimates that if flows through the strait were halted, Brent crude could hit $71 per barrel in the second quarter and $91 per barrel by year-end.

"Iran's familiar tactics, such as closing the Strait of Hormuz, banking on its trade with China, and threatening nuclear escalation, are still on the table," said Aditya Saraswat, MENA Research Director at Rystad Energy, on January 22.

Tehran has threatened to close this strategic waterway multiple times since the Iran-Iraq War in the 1980s. It's an old playbook, but it still works as leverage.

Europe's Constrained Position

For the European Union, over 30% of its total LNG transits through the Strait of Hormuz. An escalation in the region could seriously damage economic growth in a bloc that's already struggling. The International Monetary Fund forecasted in January that the Euro Area's GDP will expand by just 1.4% in 2025. Germany, Europe's economic powerhouse, grew by a meager 0.2% compared with 4.3% annualized US growth in the third quarter.

These economic constraints have pushed Brussels toward what amounts to symbolic gestures. The EU has proposed sanctions against Iran's interior minister and 14 other senior officials for their role in the violent crackdown. The European Parliament urged Brussels on Thursday to designate the Islamic Revolutionary Guard Corps (IRGC) as a terrorist organization. EU leadership summoned Iranian representatives on January 13 to account for the mass bloodshed.

Human Rights Watch verified on January 8 the involvement of the IRGC in the killings and violence against demonstrators. But internal EU divisions have stalled any meaningful action, with several member states resisting a formal terrorist designation.

Symbolic Gestures Versus Real Consequences

French Foreign Minister Jean-Noël Barrot said on January 13 that there could be "no impunity for those who turn their guns on peaceful protesters." British Foreign Secretary Yvette Cooper told parliament she called on Iran's ambassador to "answer for the horrific reports that we are hearing."

Strong words, but European officials have so far refused to designate the IRGC as a terrorist organization. British Business Secretary Peter Kyle concluded on January 12 that the designation wasn't "appropriate," and France's UN Ambassador Jerome Bonnafont said sanctions were the bloc's principal response.

"The EU and European nations — purely symbolically — called Iranian ambassadors," wrote Janatan Sayeh, research analyst and Iran specialist at the Foundation for Defense of Democracies, on January 16. "Absent meaningful consequences for the Islamic Republic, summons and tongue lashings have fallen flat, protecting no one and deterring nothing."

Even Ukrainian President Volodymyr Zelenskyy criticized the European response during his speech at the World Economic Forum in Davos, Switzerland this week.

"In Europe, there were Christmas and New Year celebrations, the seasonal holidays," Zelenskyy said. "By the time politicians came back to work and began forming a position, the Ayatollah had already killed thousands. Europe offers nothing and does not want to enter this issue as a supporter of the Iranian people and the democracy they need."

Washington Takes a Different Approach

The US has taken a much harder line, and that's partly because it has more room to maneuver. America imports less than 10% of its oil from the Persian Gulf, which means it doesn't face the same energy security constraints as Europe. President Trump threatened military action if "Iran violently kills peaceful protesters, which is their custom."

The Pentagon has rushed Boeing Co. (BA) F-15E Strike Eagles to the Middle East to reinforce its airpower. The US military has also dispatched an aircraft carrier, the USS Abraham Lincoln.

But here's the thing: the US approach isn't really about Iran alone. It's part of a broader strategy to constrain China's energy security. China purchased more than 80% of Iran's oil exports in 2025, making Iranian crude critical to Beijing's industrial and military operations.

"Xi Jinping now has the additional worry that, if Ayatollah Ali Khamenei is toppled in Iran, his country will lose unfettered access to cheap oil from that country as well," wrote Steven W. Mosher, China expert and President of the Population Research Institute, on January 17. "The effective result would be an American chokehold on the energy that China's industry — and its military — needs to operate."

The China Angle

A collapse of the Ayatollah's regime would be a "geopolitical disaster for Beijing," Mosher argued. It would allow the US to finally execute its "long-delayed pivot to Asia," with additional forces reinforcing America's existing presence in South Korea, Japan, and the Philippines. Such a shift would further complicate "China's strategic planning for, say, a future invasion of Taiwan," he said.

The US actions in Venezuela provide a template for what Washington might have in mind. China was the top buyer of Venezuelan oil and supplier of military equipment to the regime in Caracas before the recent US intervention there.

"Nicolás Maduro was China's most important partner in Latin America," wrote Connor Pfeiffer, FDD senior director of government relations, on January 16. "His capture is a clear message to the hemisphere that when the chips are down, Beijing is unwilling and unable to offer more than diplomatic protest in the face of serious US pushback."

So what we're watching in Iran isn't just about human rights or regional stability. It's about energy security, great-power competition, and the fundamental question of whether China can maintain access to the resources it needs for its economy and military. Europe sees an energy crisis that could sink its fragile recovery. The US sees an opportunity to reshape the geopolitical landscape and constrain its primary competitor.

The widening split between Washington and Brussels underscores how energy security and great-power rivalry are reshaping Western policy toward Iran. And Tehran's unrest is reverberating far beyond its borders, with implications for oil markets, Chinese strategic planning, and the future balance of power in Asia and the Middle East.