Background 

President Carter’s biggest foreign policy problem was the Iranian hostage crisis, whose roots lay in the 1950s. In 1953, the United States had assisted Great Britain in the overthrow of Prime Minister Mohammad Mossadegh, a rival of Mohammad Reza Pahlavi, the shah of Iran. Mossadegh had sought greater Iranian control over the nation’s oil wealth, which was claimed by British imperialist companies. Following the coup, Shah Pahlavi assumed complete control of Iran’s government. He then disposed of political enemies and eliminated dissent through the use of SAVAK, a secret police force trained by the United States. The United States also supplied the shah’s government with billions of dollars in aid. As Iran’s oil revenue grew, especially after the 1973 oil embargo against the United States, the pace of its economic development and the size of its educated middle class also increased, and the country became less dependent on U.S. aid. Its population increasingly blamed the United States for the death of Iranian democracy and criticized its consistent support of Israel.

The Hostage Crisis

Despite the shah’s unpopularity among his own people, the result of both his brutal policies and his desire to Westernize Iran, the United States supported his regime. In February of 1979, the shah was overthrown when revolution broke out, and a few months later, he departed for the United States for medical treatment. The long history of U.S. support for him and its offer of refuge greatly angered Iranian revolutionaries. On November 4, 1979, a group of Iranian students and activists, including Islamic fundamentalists who wished to end the Westernization and secularization of Iran, invaded the American embassy in Tehran and seized 66 embassy employees. The women and African Americans were soon released, leaving 53 men as hostages. Another hostage was released when he developed serious medical problems. 

Carter's negotiations with the Iranian activists failed to free them. The episode reached a climax when the United States military attempted a rescue operation off the U.S.S. Nimitz, an aircraft carrier. On April 24, 1980, Operation Eagle Claw resulted in a failed mission, the deaths of eight American servicemen and one Iranian civilian, and the destruction of two aircrafts. developed serious medical problems. 

On July 27, 1980, the former shah died; then in September of 1980, Iraqi President Saddam Hussein launched an invasion of Iran. These two events led the Iranian government to enter into negotiations with the U.S., with Algeria acting as a mediator. The 52 remaining hostages were formally released into United States custody on January 20, 1981, the day after the signing of the Algiers Accords, a deal brokered by Algeria between America and Iran, just minutes after the new American president Ronald Reagan was sworn into office. 

The release of the hostages

The fifty-two American hostages return from Iran in January 1981. They had been held for 444 days.

Aftermath

In Iran, the taking of hostages was widely seen as an act of resistance against U.S. influence in Iran, its attempts to undermine the Iranian Revolution, and its longstanding support of Shah Pahlavi of Iran, recently overthrown by the revolution. In the United States, the hostage situation was seen as an outrage that violated international law granting diplomats immunity from arrest and diplomatic compounds' inviolability.

The crisis has also been described as the "pivotal episode" in the history of Iran–United States relations. In the United States, some political analysts believe the crisis was a major reason for U.S. President Jimmy Carter's defeat in the November 1980 presidential election. In Iran, the crisis strengthened the prestige of the Ayatollah Khomeini and the political power of those who supported theocracy and opposed any normalization of relations with the West. The crisis also marked the beginning of U.S. legal action, or economic sanctions, against Iran, which further weakened economic ties between Iran and the United States.

The hostage situation, in some respects, was unsuccessful for the Islamic Republic. Iran lost international support for its war against Iraq, and the settlement was considered almost wholly favorable to the United States since it did not meet any of Iran's original demands. However, the crisis strengthened both anti-Iranian (and more broadly, anti-Islamic) sentiment in the U.S. and anti-American sentiment in Iran.