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Carter's term happened at a time of turmoil in the Middle East, and his handling of these affairs are generally considered to have been his downfall.

In 1978-79, Iran had a revolution, with the old Shah (king) overthrown and the new Islamic theocracy put in place which is still there to this day; the new government was openly hostile towards the US, which had supported the Shah. At the end of 1979, Iranians stormed the US embassy in Tehran, taking 50 Americans hostage. The hostage crisis lasted all through 1980 and made Carter look bad.

The revolution in Iran also had the side effect of a massive increase in oil and gas prices- Iran was a major oil supplier, and suddenly stopped producing oil. The price increases harmed the US economy, and people blamed Carter for not being able to fix it.

Lastly, in April 1980, Carter ordered the US Military to attempt a rescue mission to free the hostages. Long story short, the attempt failed because some of the aircraft crashed on the way to the mission, killing several soldiers. The debacle further eroded public confidence in Carter, and he was defeated in the election about six months later.

The hostages were freed on January 20, 1981- twenty minutes after Reagan's inauguration. The so-called "October Surprise" conspiracy theory claims that in October 1980, Reagan asked Iran to intentionally keep the hostages, to make Carter look bad. The allegations have never been definitively proven.

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