The U.S.-Israeli strikes against Iran and reprisals by Tehran could severely disrupt the global supply of crude oil and send prices soaring to levels not seen in years.
Iran remains just inside the world's top 10 oil producers even though its output has fallen sharply since the 1970s, hit in particular by rounds of U.S. sanctions.
"In 1974, Iran was the third-biggest producer in the world after the U.S. and Saudi Arabia, and ahead of Russia, producing some six million barrels per day," Arne Lohmann Rasmussen, chief analyst at Global Risk Management, told AFP.
Today, Iran produces about 3.1 million barrels per day.
This remains a significant amount, and the Islamic republic is believed to hold the world's third-largest crude reserves, cementing its strategic importance.
The main risk to the oil market remains a blockade of the Strait of Hormuz, a vital waterway connecting the Middle East to the rest of the world for oil and gas shipments, which Iran has frequently threatened to paralyze.
Local Iranian media reported late on Feb. 28 that the country's Revolutionary Guards had warned "various ships" that the strait was currently unsafe to navigate due to U.S. and Israeli attacks and therefore effectively closed.
The impact on oil prices will remain unknown until Brent futures markets reopen for the coming week, but analysts have sounded warnings about such a scenario.
"In the event of a prolonged blockade of the Strait of Hormuz and a regional flare-up, prices could rise much further and could reach levels between $120 and $140 dollars" per barrel, Kpler analyst Homayoun Falakshahi told AFP before Feb. 28’s dramatic developments.
Approximately 20 million barrels of crude oil passed through the narrow waterway daily in 2024, equivalent to nearly 20 percent of global liquid oil consumption, according to the U.S. Energy Information Administration (EIA).
"Even a doubt about security in the Strait would prompt many vessels, for insurance reasons, to face difficulties transiting, as premiums would rise sharply," said Rasmussen.
According to Saxo Bank analyst Ole Hansen, "only Saudi Arabia and the United Arab Emirates possess meaningful bypass infrastructure."
The route could transport a maximum of 2.6 million barrels daily, noted the EIA.
But U.S. air and navy assets could re-establish shipping security if Washington chose to do so, said Jakob Larsen, safety chief at shipping association BIMCO.
Iranian crude is relatively easy and cheap to extract, with production costs as little as $10 per barrel, making it particularly profitable, Rasmussen said.
Only Saudi Arabia, Iraq, Kuwait and the UAE enjoy similarly low production costs.
By comparison, major Western producers like Canada and the U.S. typically face costs of $40 to $60 per barrel.
With such low costs, Iran gains disproportionately from high global prices, a crucial factor for an economy heavily reliant on oil revenues.
U.S. sanctions imposed since the 1979 Islamic Revolution have left Iran with few export options, especially after President Donald Trump revived a "maximum pressure" policy on Tehran upon his return to office.
Iran exports between 1.3 and 1.5 million barrels daily, with more than 80 percent of the total bound for Chinese refineries owing to U.S. sanctions, according to Hansen.
Oil producing U.S. allies Kuwait, the UAE and Iraq were all targeted by Iranian reprisal attacks on Feb. 28.
"The risk of escalation is greater than seen in recent regional conflicts," said Jason Bordoff, founding director at Columbia University's Center on Global Energy Policy.
At-risk infrastructure includes hydrocarbon hubs as well as electrical power and seawater desalination plants, he added.
Soaring oil prices meanwhile risk a return to soaring inflation, hurting the global economy.
Crude reaching $100 per barrel for the first time since the start of Russia's invasion of Ukraine in February 2022 could also hurt Trump in the midterm elections at the end of the year, especially as he has promised American voters cheap energy.
