Ayatollah Ali Khamenei, Iran's supreme leader, on Sunday backed the government's decision to raise gasoline prices and called angry protesters who have been setting fire to public property over the hike "thugs."
Iran said it still faced riots even though the situation was "calmer" on Monday after days of violent protests sparked by a shock decision to hike petrol prices in the sanctions-hit country.
Major roads have been blocked, banks torched and shops looted in the nationwide unrest since Friday.
Officials have confirmed the deaths of two people — a civilian and a policeman — although the toll could be as high as eight, according to unofficial reports published by various Iranian news agencies.
Masked young men have been seen on debris-strewn streets setting buildings ablaze in footage that has been aired on state TV, which rarely shows any signs of dissent.
The Basij militia, a volunteer force loyal to the establishment, also reported looting.
Its commander Brigadier General Gholamreza Soleimani accused Iran's archenemy the United States of instigating the unrest and said "America's plot failed," according to semi-official news agency ISNA.
Demonstrations broke out on Friday after it was announced the price of petrol would be raised by 50 percent for the first 60 litres and 200 percent for any extra fuel after that each month.
Iran's economy has been battered since May last year when President Donald Trump unilaterally withdrew the US from a 2015 nuclear agreement and reimposed crippling sanctions.
The authorities say they have arrested more than 200 people and restricted internet access.
Netblocks, a website that monitors net shutdowns, tweeted, "40 hours after #Iran implemented a near-total internet shutdown, connectivity to the outside world remains at just 5% of ordinary levels."
Government spokesman Ali Rabiei said the situation was "calmer" on Monday.
He said there were still "some minor issues" but predicted that "tomorrow and the day after we won't have any issues with regard to riots," without elaborating.
"There have been gatherings in some cities, in some provinces."
Pressed to give figures on casualties in the unrest, he said, "What I can tell you today is that gatherings are about 80 percent less than the previous day."
The situation on the streets has been unclear largely due to the internet outage that has stemmed the flow of videos shared on social media of protests or associated acts of violence.
The US on Sunday condemned Iran for using "lethal force."
"The United States supports the Iranian people in their peaceful protests against the regime that is supposed to lead them," said White House press secretary Stephanie Grisham.
Iran slammed US Secretary of State Mike Pompeo after he tweeted "the United States is with you" on Saturday in response to the demonstrations.
The Foreign Ministry said it was reacting to Pompeo's "expression of support ... for a group of rioters in some cities of Iran and condemned such support and interventionist remarks."
"The dignified people of Iran know well that such hypocritical remarks do not carry any honest sympathy," said its spokesman Abbas Mousavi.
"It's curious that the sympathising is being done with the people who are under the pressure of America's economic terrorism," he said, referring to sanctions.
Germany called on Monday for dialogue between the government and "legitimate" protesters in Iran.
France, for its part, reiterated its support for the right to peaceful demonstration and voiced regret for the death of "several" protesters.
Iran announced the decision to impose petrol price hikes and rationing at midnight Thursday-Friday, saying the move was aimed at helping the needy with cash handouts.
The plan agreed by a council made up of the president, parliament speaker and judiciary chief comes at a sensitive time ahead of February parliamentary elections.
It won support on Sunday from Iran's Supreme Leader Ayatollah Ali Khamenei.
Khamenei blamed "hooligans" for damaging property and said "all the centres of the world's wickedness against us have cheered" the unrest.
President Hassan Rouhani on Sunday defended the petrol price hike whose proceeds are to be used to make welfare payments to 60 million Iranians.
But he also warned that Iran could not allow "insecurity."
"Protesting is the people's right, but protesting is different from rioting. We should not allow insecurity in the society."
The Intelligence Ministry said it has identified those behind the unrest and that measures would be taken against them.
Forty people have been arrested in the central city of Yazd and another 180 in the southern province of Khuzestan, according to Iranian news agencies.
The Revolutionary Guard arrested 150 protest "leaders" in Alborz province, said Tasnim news agency, adding they had confessed to having "received money" to torch buildings.
In a statement carried on Monday by state news agency IRNA, the Revolutionary Guard warned that if necessary it will "confront decisively ... the continuation of any insecurity and actions disrupting people's peace and calm."