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Uber Eats exits seven markets, transfers one as part of competitive retooling

Uber Eats is pulling out of a clutch of markets — shuttering its on-demand food offering in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine.

It’s also transferring its Uber Eats business operations in the United Arab Emirates (UAE) to Careem, its wholly owned ride-hailing subsidiary that’s mostly focused on the Middle East.

“Consumers and restaurants using the Uber Eats app in the UAE will be transitioned to the Careem platform in the coming weeks, after which the Uber Eats app will no longer be available,” it writes in a regulatory filing detailing the operational shifts.

“These decisions were made as part of the Company’s ongoing strategy to be in first or second position in all Eats markets by leaning into investment in some countries while exiting others,” the filing adds.

An Uber spokesman said the changes are not related to the coronavirus pandemic but rather related to an ongoing “strategy of record” for the company to hold a first or second position in all Eats markets — which means it’s leaning into investment in some countries while exiting others.

Earlier this year, for example, Uber pulled the plug on its Eats offer in India — selling to local rival Zomato. Zomato and Swiggy hold the top two slots in the market. (As part of that deal Uber took a 9.99% stake in Zomato.)

Uber Eats rival, Glovo, also announced a series of exits at the start of this year — as part of its own competitive reconfiguration in a drive to cut losses and shoot for profitability. It too says its goal is to be the first or second platform in all markets where it operates.

The category is facing major questions about profitability — with now the added challenge of the coronavirus crisis. (Related: Another player in the space, Uk-based Deliveroo, confirmed a major round of layoffs last week.) tl;dr, on-demand unit economics don’t stack up unless you can command large enough marketshare so it looks like the competitive pack is thinning as it becomes clearer who’s winning where.

In a statement on the latest round of Eats exits, Uber said: “We have made the decision to discontinue Uber Eats in Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine, and Uruguay, and to wind down the Eats app and transition operations to Careem in U.A.E. This continues our strategy of focusing our energy and resources on our top Eats markets around the world.”

The discontinued and transferred markets represented 1% of Eats’ Gross Bookings and 4% of Eats Adjusted EBITDA losses in Q1 2020, per Uber’s filing. 

“Consistent with our stated strategy, we will look to reinvest these savings in priority markets where we expect a better return on investment,” the filing adds. 

The Uber Eats spokesman told us that the exits do not sum to any change to the ‘more than 6,000 cities’ figure for the unit’s market footprint — which Uber reported earlier this year.

Asked which markets the company considers to be priorities going forward the spokesman did not respond. It’s also not clear whether or not Uber sought buyers for the shuttered units.

Per Uber’s filing, Eats operations will be fully discontinue in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine by June 4, 2020.

Uber Rides operations are not affected, it adds.

A source familiar with Uber also said the changes will allow the company to focus resources on new business lines — such as grocery and delivery.

The coronavirus pandemic has disrupted the on-demand food delivery business as usual in many markets — with convenience-loving customers locked down at home so likely to be cooking more, and large numbers of restaurants closed (at least temporarily), putting a dent in the provider side of these platforms too.

At the same time there is a demand upside story in the groceries category. And last month Uber announced a tie-up with a major French supermarket, Carrefour, to expand its delivery offering nationwide. It also inked other grocery-related partnerships in Spain and Brazil.

Grocery delivery has been seeing a massive uptick as consumers look for ways to replenish their food cupboards while limiting infection risk.

While other types of deliveries — from pharmaceuticals to personal protective equipment — also potentially offer growth opportunities for on-demand logistics businesses, which is how many major food delivery platforms prefer to describe themselves.

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Uber Eats exits seven markets, transfers one as part of competitive retooling

Uber Eats is pulling out of a clutch of markets — shuttering its on-demand food offering in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine.

It’s also transferring its Uber Eats business operations in the United Arab Emirates (UAE) to Careem, its wholly owned ride-hailing subsidiary that’s mostly focused on the Middle East.

“Consumers and restaurants using the Uber Eats app in the UAE will be transitioned to the Careem platform in the coming weeks, after which the Uber Eats app will no longer be available,” it writes in a regulatory filing detailing the operational shifts.

“These decisions were made as part of the Company’s ongoing strategy to be in first or second position in all Eats markets by leaning into investment in some countries while exiting others,” the filing adds.

An Uber spokesman said the changes are not related to the coronavirus pandemic but rather related to an ongoing “strategy of record” for the company to hold a first or second position in all Eats markets — which means it’s leaning into investment in some countries while exiting others.

Earlier this year, for example, Uber pulled the plug on its Eats offer in India — selling to local rival Zomato. Zomato and Swiggy hold the top two slots in the market. (As part of that deal Uber took a 9.99% stake in Zomato.)

Uber Eats rival, Glovo, also announced a series of exits at the start of this year — as part of its own competitive reconfiguration in a drive to cut losses and shoot for profitability. It too says its goal is to be the first or second platform in all markets where it operates.

The category is facing major questions about profitability — with now the added challenge of the coronavirus crisis. (Related: Another player in the space, Uk-based Deliveroo, confirmed a major round of layoffs last week.) tl;dr, on-demand unit economics don’t stack up unless you can command large enough marketshare so it looks like the competitive pack is thinning as it becomes clearer who’s winning where.

In a statement on the latest round of Eats exits, Uber said: “We have made the decision to discontinue Uber Eats in Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine, and Uruguay, and to wind down the Eats app and transition operations to Careem in U.A.E. This continues our strategy of focusing our energy and resources on our top Eats markets around the world.”

The discontinued and transferred markets represented 1% of Eats’ Gross Bookings and 4% of Eats Adjusted EBITDA losses in Q1 2020, per Uber’s filing. 

“Consistent with our stated strategy, we will look to reinvest these savings in priority markets where we expect a better return on investment,” the filing adds. 

The Uber Eats spokesman told us that the exits do not sum to any change to the ‘more than 6,000 cities’ figure for the unit’s market footprint — which Uber reported earlier this year.

Asked which markets the company considers to be priorities going forward the spokesman did not respond. It’s also not clear whether or not Uber sought buyers for the shuttered units.

Per Uber’s filing, Eats operations will be fully discontinue in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine by June 4, 2020.

Uber Rides operations are not affected, it adds.

A source familiar with Uber also said the changes will allow the company to focus resources on new business lines — such as grocery and delivery.

The coronavirus pandemic has disrupted the on-demand food delivery business as usual in many markets — with convenience-loving customers locked down at home so likely to be cooking more, and large numbers of restaurants closed (at least temporarily), putting a dent in the provider side of these platforms too.

At the same time there is a demand upside story in the groceries category. And last month Uber announced a tie-up with a major French supermarket, Carrefour, to expand its delivery offering nationwide. It also inked other grocery-related partnerships in Spain and Brazil.

Grocery delivery has been seeing a massive uptick as consumers look for ways to replenish their food cupboards while limiting infection risk.

While other types of deliveries — from pharmaceuticals to personal protective equipment — also potentially offer growth opportunities for on-demand logistics businesses, which is how many major food delivery platforms prefer to describe themselves.

Read More

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Delivery Hero urges users to go cashless, no contact for food deliveries

Delivery Hero has switched to cash-less, non-contact for deliveries in areas it defines as “high risk” for the transmission of the SARS-CoV-2 virus to reduce personal contact between couriers and customers during the coronavirus pandemic. But it’s encouraging all customers to make the switch.
“By introducing contactless delivery, we …

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Coronavirus could shift balance in Emirates’ relationship with Dubai, says GlobalData

Following
the recent news that Dubai-based carrier Emirates Group asked staff to take
paid and unpaid leave in response to the effect of the new coronavirus (Covid-19)
on the business;

Colin
Foreman, Deputy Editor at GlobalData, a leading data and analytics company,
offers his view:

“Airlines are among the most

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Global M&A activity remained subdued in Q4 2019

Global mergers and acquisitions (M&A) activity remained subdued with a decline registered both in deal volume and value in the fourth quarter (Q4) of 2019, according to GlobalData, a leading data and analytics company.

Total M&A volume and value declined by 0.6% and 4.5% in Q4 2019 compared to Q4 2018, respectively. The decline could primarily be attributed to underperformance in the North American region, which witnessed decline in deal volume from ~3,000 deals in Q4 2018 to ~2,800 deals in Q4 2019. The region also witnessed a decrease in deal value by around 13% in Q4 2019 compared to Q4 2018.

Global M&A Actitivity Analysis - Q4 - 2019

Image for publication: Please click here for enlarged image

The Middle East and Africa were the other regions to witness a decline in both deal volume and value by ~15% and ~40% in Q4 2019 compared to Q4 2018, respectively.

On the other hand, the South and Central America regions saw growth in value worth US$20.16bn in Q4 2019 compared to US$18.21bn in Q4 2018. However, it did not show improvement in volume, which declined from 290 M&A deals in Q4 2018 to 247 M&A deals in Q4 2019.

Amidst underperformance of several regions, Asia-Pacific and Europe emerged as the top performers for M&A activity.

Asia-Pacific witnessed growth in M&A deal volume and value by ~20% and ~10% in Q4 2019 compared to Q4 2018, respectively.

Moreover, Europe witnessed a slight growth from ~2,000 M&A deals worth ~US$118bn in Q4 2018 to ~2,100 M&A deals worth ~US$130bn in Q4 2019.

Some of the notable M&A deals announced during Q4 2019 included the acquisition of TD Ameritrade by Charles Schwab for US$26bn, the acquisition of Tiffany by LVMH Moet Hennessy Louis Vuitton for US$16.3bn, and the acquisition of Liberty Property Trust by Prologis for US$12.6bn, among others.

Source: GlobalData

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Glovo exits the Middle East and drops two LatAm markets in latest food delivery crunch

The new year isn’t even a month old and the food delivery crunch is already taking big bites. Spain’s Glovo has today announced it’s exiting four markets — which it says is part of a goal of pushing for profitability by 2021.

Also today, Uber confirmed rumors late last year by announcing it’s offloading its Indian Eats business to local rival Zomato — which will see it take a 9.99% stake in the Indian startup.

In other recent news Latin America focused on-demand delivery app Rappi announced 6% staff layoffs.

On-demand food delivery apps may be great at filling the bellies of hungry consumers fast but startups in this space have yet to figure out how to deliver push-button convenience without haemorrhaging money at scale.

So the question even some investors are asking is how they can make their model profitable?

Middle East exit

The four markets Glovo is leaving are Turkey, Egypt, Uruguay and Puerto Rico.

The exits mean its app footprint is shrinking to 22 markets, still with a focus on South America, South West Europe, and Eastern Europe and Africa.

Interestingly, Glovo is here essentially saying goodbye to the Middle East — despite its recent late stage financing round being led by Abu Dhabi state investment company, Mubadala. (It told us last month that regional expansion was not part of Mubadala’s investment thesis.)

Commenting on the exits in a statement, Glovo co-founder and CEO, Oscar Pierre, said: “This has been a very tough decision to take but our strategy has always been to focus on markets where we can grow and establish ourselves among the top two delivery players while providing a first-class user experience and value for our Glovers, customers and partners.”

Last month Pierre told us the Middle East looks too competitive for Glovo to expand further.

In the event it’s opted for a full exit — given both Egypt and Turkey are being dropped (despite the latter being touted as one of Glovo’s fastest growing markets just over a year ago, at the time of its Series D).

“Leaving these four markets will help us to further strengthen our leadership position in South West and Eastern Europe, LatAm and other African markets, and reach our profitability targets by early 2021,” Pierre added.

Glovo said its app will continue to function in the four markets “for a few weeks” after today — adding that it’s offering “support and advice to couriers, customers and partners throughout this transition”.

“I want to place on record our thanks to all of our Glovers, customers and partners in the markets from which we’re withdrawing for their hard work, dedication, commitment and ongoing support,” Pierre added.

The exits sum to Glovo withdrawing from eight out of a total 306 cities.

It also said the eight cities collectively generated 1.7% of its gross sales in 2019 — so it’s signalling the move doesn’t amount to a major revenue hit.

The startup disclosed a $166M Series E raise last month — which pushed the business past a unicorn valuation. Pierre told us then that the new financing would be used to achieve profitability “as early as 2021”, foreshadowing today’s announcement of a clutch of market exits.

Glovo has said its goal is to become the leading or second delivery platform in all the markets where it operates — underlining the challenges of turning a profit in such a hyper competitive, thin margin space which also involves major logistical complexities with so many moving parts (and people) involved in each transaction.

As food delivery players reconfigure their regional footprints — via market exits and consolidation — better financed platforms will be hoping they’ll be left standing with a profitable business to shout about (and the chance to grow again by gobbling up less profitable rivals or else be consumed themselves). So something of a new race is on.

Back in November in an on-stage interview at TechCrunch Disrupt Berlin, Uber Eats and Glovo discussed the challenges of turning a profit — with Glovo co-founder Sacha Michaud telling us he expects further consolidation in the on-demand delivery space. (Though the pair claimed there had been no acquisition talks between Uber and Glovo.)

Michaud said then that Glovo is profitable on a per unit economics basis in “some countries” — but admitted it “varies a lot country by country”.

Spain and Southern Europe are the best markets for Glovo, he also told us, confirming it generates operating profit there. “Latin America will become operation profitable next year,” he predicted.

Glovo’s exit from Egypt actually marks the end of a second act in the market.

The startup first announced it was pulling the plug on Egypt in April 2019 — but returned last summer, at the behest of its investor Delivery Hero (a rival food delivery startup which has a stake in Glovo), according to Michaud’s explanation on stage.

However there was also an intervention by Egypt’s competition watchdog. And local press reported the watchdog had ordered Glovo to resume operations — accusing it and its investor of colluding to restrict competition in the market (Delivery Hero having previously acquired Egyptian food delivery rival, Otlob).

What the watchdog makes of today’s announcement of a final bow out could thus be an interesting wrinkle.

Asked about Egypt, a Glovo spokesperson told us: “Egypt has been a very complex market for us, we were sad to leave the first time and excited to return when we did so last summer. However, our strategy has always been to be among the top two delivery players in every market we enter and have a clear path to profitability. Unfortunately, in Egypt there is not a clear path to profitability.”

Whither profitability?

So what does a clear path to profitability in the on-demand delivery space look like?

Market maturity/density appears to be key, with Glovo only operating in one city apiece in the other two markets it’s leaving, Uruguay and Puerto Rico, for example — compared to hundreds across its best markets, Spain and Italy, where it says it’s operating out of the red.

This suggests that other markets in South America — where Glovo similarly has just a toe-hold, of a single or handful of cities, and less time on the ground, such as Honduras or Panama — could be vulnerable to further future exits as the company reconfigures to try to hit full profitability in just around a year’s time.

But there are likely lots of factors involved in making the unit economics stack up so it’s tricky to predict.

Food delivered on-demand makes up the majority of Glovo’s orders per market but its app also touts being able to deliver ‘anything’ — from groceries to pharmaceuticals to the house keys you left at home — which it claims as a differentiating factor vs rival food-delivery-only apps.

A degree of variety also looks to be a key ingredient in becoming a sustainable on-demand delivery business — as scale and cross selling appear to where the unit economics can work.

Groceries are certainly a growing focus for Glovo which has been investing in setting up networks of dark supermarkets to support fast delivery of convenience style groceries as well as ready-to-eat food — thereby expanding opportunities for cross-selling to its convenience-loving food junkies at the point of appetite-driven (but likely loss-making) lunch and dinner orders.

Last year Michaud told us that market “maturity” supports profitability. “At the end of the day the more orders we have the better the whole ecosystem works,” he said.

While Uber Eats’ general manager for Northern and Eastern Europe, Charity Safford, also pointed to “scale” as the secret sauce for still elusive profits.

“Where we start to see more and more trips happening this is definitely where we see the unit economics improving — so our job is really to figure out all of the use cases we can put into people’s hands to get that application used as much as possible,” she said.

It’s instructive that Uber is shifting towards a ‘superapp’ model — revealing its intent last year to fold previously separate lines of business, such as rides and Eats, into a single one-stop-shop app which it began rolling out last year. So it’s also able to deliver or serve an increasing number of things (and/or services).

The tech giant has also been testing subscription passes which combine access to a range of its offerings under one regular payment.

In some markets Glovo also has a ‘Prime’ monthly subscription, offering unlimited deliveries of anything its couriers can bike to your door, for a fixed monthly cost — which it launched back in 2018.

When it comes to the quest for on-demand profitability all roads seem to lead to trying to become the bit of Amazon’s business that Amazon hasn’t already built out and swiped.

Source: TechCrunch

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Middle East set to contribute 17% of global new-build trunk petroleum products pipeline length additions by 2023

The Middle East is expected to contribute 17% of global new-build trunk/transmission petroleum products pipeline length additions by 2023, says GlobalData, a leading data, and analytics company.

The company’s latest report, ‘Global Petroleum Products Pipelines Industry Outlook to 2023 – Capacity and Capital Expenditure Outlook with Details of All Operating and Planned Petroleum Products Pipelines’, reveals that the Middle East is likely to have new-build petroleum products pipeline length of 3,483km by 2023.

Varun Ette, Oil and Gas Analyst at GlobalData, comments: “The Middle East is expected to begin operations of 11 trunk pipelines by 2023. Abadan–Rey is the longest upcoming petroleum products pipeline in the region with a length of 920km. The pipeline is slated to commence operations in 2020.”

GlobalData identifies Iran as the potential top contributor to the regional new-build petroleum products pipelines, with five upcoming pipelines with a total length of 2,654km. All the pipelines proposed in the country are planned pipelines with identified development.

Ette concludes: “Saudi Arabia is the second highest contributor to the Middle East’s pipeline length additions by 2023. Yanbu–North Jeddah I and Yanbu–North Jeddah II are the only upcoming planned petroleum products pipelines with proposed lengths of 333.5km each. Both are expected to start operations in 2021.”

Source: GlobalData

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Iran’s Grim Economy Limits Its Willingness to Confront the U.S.

LONDON — Iran is caught in a wretched economic crisis. Jobs are scarce. Prices for food and other necessities are skyrocketing. The economy is rapidly shrinking. Iranians are increasingly disgusted.

Crippling sanctions imposed by the Trump administration have severed Iran’s access to international markets, decimating the economy, which is now contracting at an alarming 9.5 percent annual rate, the International Monetary Fund estimated. Oil exports were effectively zero in December, according to Oxford Economics, as the sanctions have prevented sales, even though smugglers have transported unknown volumes.

The bleak economy appears to be tempering the willingness of Iran to escalate hostilities with the United States, its leaders cognizant that war could profoundly worsen national fortunes. In recent months, public anger over joblessness, economic anxiety and corruption has emerged as a potentially existential threat to Iran’s hard-line regime.

Only a week ago, such sentiments had been redirected by outrage over the Trump administration’s Jan. 3 killing of Iran’s top military commander, Maj. Gen. Qassim Suleimani. But protests flared anew over the weekend in Tehran, and then continued on Monday, after the government’s astonishing admission that it was — despite three days of denial — responsible for shooting down a Ukrainian jetliner.

The demonstrations were most pointedly an expression of contempt for the regime’s cover-up following its downing of the Ukrainian jet, which killed all 176 people on board. But the fury in the streets resonated as a rebuke for broader grievances — diminishing livelihoods, financial anxiety and the sense that the regime is at best impotent in the face of formidable troubles.

Inflation is running near 40 percent, assailing consumers with sharply rising prices for food and other basic necessities. More than one in four young Iranians is jobless, with college graduates especially short of work, according to the World Bank.

The missile strikes that Iran unleashed on American bases in Iraq last week in response to Gen. Suleimani’s killing appeared calibrated to enable its leaders to declare that vengeance had been secured without provoking an extreme response from President Trump, such as aerial bombing.

Hostilities with the most powerful military on earth would make life even more punishing for ordinary Iranians. It would likely weaken the currency and exacerbate inflation, while menacing what remains of national industry, eliminating jobs and reinvigorating public pressure on the leadership.

Conflict could threaten a run on domestic banks by sending more companies into distress. Iranian companies have been spared from collapse by surges of credit from banks. The government controls about 70 percent of banking assets, according to a paper by Adnan Mazarei, a former I.M.F. deputy director and now a senior fellow at the Peterson Institute for International Economics in Washington. Roughly half of all bank loans are in arrears, Iran’s Parliament has estimated.

Many Iranian companies depend on imported goods to make and sell products, from machinery to steel to grain. If Iran’s currency declines further, those companies would have to pay more for such goods. Banks would either have to extend more loans, or businesses would collapse, adding to the ranks of the jobless.

The central bank has been financing government spending, filling holes in a tattered budget to limit public ire over cuts. That entails printing Iranian money, adding to the strains on the currency. A war could prompt wealthier Iranians to yank assets out of the country, threatening a further decline in the currency and producing runaway inflation.

In sum, this is the unpalatable choice confronting the Iranian leadership: It can keep the economy going by continuing to steer credit to banks and industry, adding to the risks of an eventual banking disaster and hyperinflation. Or it can opt for austerity that would cause immediate public suffering, threatening more street demonstrations.

“That is the specter hanging over the Iranian economy,” Mr. Mazarei said. “The current economic situation is not sustainable.”

Though such realities appear to be limiting Iran’s appetite for escalation, some experts suggest that the regime’s hard-liners may eventually come to embrace hostilities with the United States as a means of stimulating the anemic economy.

Cut off from international investors and markets, Iran has in recent years focused on forging a so-called resistance economy in which the state has invested aggressively, subsidizing strategic industries, while seeking to substitute domestic production for imported goods.

That strategy has been inefficient, say economists, adding to the strains on Iran’s budget and the banking system, but it appears to have raised employment. Hard-liners might come see a fight with Iran’s archenemy, the United States, as an opportunity to expand the resistance economy while stoking politically useful nationalist anger.

“There will be those who will argue that we can’t sustain the current situation if we don’t have a war,” said Yassamine Mather, a political economist at the University of Oxford. “For the Iranian government, living in crisis is good. It’s always been good, because you can blame all the economic problems on sanctions, or on the foreign threat of war. In the last couple of years, Iran has looked for adventures as a way of diverting attention from economic problems.”

How ever Iran’s leaders proceed, experts assume that economic concerns will not be paramount: Iran’s leaders prioritize one goal above all others — their own survival. If confrontation with outside powers appears promising as a means of reinforcing their hold on power, the leadership may accept economic pain as a necessary cost.

“The hard-liners are willing to impoverish people to stay in power,” said Sanam Vakil, deputy director of the Middle East and North Africa program at Chatham House, a research institution in London. “The Islamic Republic does not make decisions based on purely economic outcomes.”

But Iran’s leaders need only survey their own region to recognize the dangers that economic distress can pose to established powers. In recent months, Iraq and Lebanon have seen furious demonstrations fueled in part by declining living standards amid corruption and abuse of power.

As recently as November, Iran’s perilous economic state appeared to pose a foundational threat to the regime. As the government scrambled to secure cash to finance aid for the poor and the jobless, it scrapped subsidies on gasoline, sending the price of fuel soaring by as much as 200 percent. That spurred angry protests in the streets of Iranian cities, with demonstrators openly calling for the expulsion of President Hassan Rouhani.

“That’s a sign of how much pressure they are under,” said Maya Senussi, a Middle East expert at Oxford Economics in London.

In unleashing the drone strike that killed General Suleimani, Mr. Trump effectively relieved the leadership of that pressure, undercutting the force of his own sanctions, say experts.

Within Iran, the killing resounded as a breach of national sovereignty and evidence that the United States bore malevolent intent. It muted the complaints that propelled November’s demonstrations — laments over rising prices, accusations of corruption and economic malpractice amid the leadership — replacing them with mourning for a man celebrated as a national hero.

A country fraught with grievances aimed directly at its senior leaders had seemingly been united in anger at the United States.

“The killing of Suleimani represents a watershed, not only in terms of directing attention away from domestic problems, but also rallying Iranians around their flag,” said Fawaz A. Gerges, a professor of international relations at the London School of Economics.

Mr. Trump had supplied the Iranian leadership “time and space to change the conversation,” he added. Iranians were no longer consumed with the “misguided and failed economic policies of the Iranian regime,” but rather “the arrogant aggression of the United States against the Iranian nation.”

But then came the government’s admission that it was responsible for bringing down the Ukrainian passenger jet. Now, Iran’s leaders again find themselves on the wrong end of angry street demonstrations.

For now, the regime is seeking to quash the demonstrations with riot police and admonitions to the protesters to go home. But if public rage continues, hard-liners may resort to challenging American interests in the hopes that confrontation will force Mr. Trump to negotiate a deal toward eliminating the sanctions.

Iran may threaten the passage of ships carrying oil through the Strait of Hormuz, the passageway for more than one-fifth of the world’s consumption of liquid petroleum. Disruption there would restrict the global supply oil, raising the price of the vital commodity. That could sow alarm in world markets while limiting global economic growth, potentially jeopardizing Mr. Trump’s re-election bid, as the logic goes.

Iran previously had a different pathway toward gaining relief from the sanctions: Under a 2015 deal forged by President Barack Obama, the sanctions were removed in exchange for Iran’s verified promise to dismantle large sections of its nuclear program.

But when Mr. Trump took office, he renounced that deal and resumed sanctions.

The Iranian leadership has courted European support for a resumption of the nuclear deal, seeking to exploit divergence between Europe and the United States. The Europeans have been unhappy about Mr. Trump’s renewed sanctions, which have dashed the hopes of German, French and Italian companies that had looked to Iran for expanded business opportunities.

Whatever comes next, Iran’s leadership is painfully aware that getting out from under the American sanctions is the only route to lifting its economy, say experts.

The nuclear deal was intended to give Iran’s leaders an incentive to diminish hostility as a means of seeking liberation from the sanctions. Mr. Trump’s abandonment of the deal effectively left them with only one means of pursuing that goal — confrontation.

“They see escalation as the only way to the negotiating table,” said Ms. Vakil. “They can’t capitulate and come to the negotiating table. They can’t compromise, because that would show weakness. By demonstrating that they can escalate, that they are fearless, they are trying to build leverage.”