The ‘war on terror’ has had significant repercussions for the Islamic Republic of Iran in both international and domestic arenas. In the international context, Iran is finding itself isolated. Gains made by the moderate leadership of President Khatami in normalising relations between Iran and the West appear to have been lost. In the domestic arena, the moderates seem powerless against the concerted advances of the hardliners, most evident in the February 2004 Parliamentary election.