OPEC’s Role Looms Large in Conflict-Driven Price Hikes?

Israel’s strikes on Iranian energy infrastructure, including the Shahran oil depot and South Pars gas field, have raised fears of disrupted oil exports from Iran, which produces 3.3 million barrels per day (bpd) and exports around 1.5 million bpd, mostly to China. OPEC+ has over 5 million bpd of spare capacity, led by Saudi Arabia and the UAE, which could theoretically replace Iran’s output.

However, Goldman Sachs estimates that a 1.75 million bpd loss from Iran would only be half-covered by OPEC+ increases, potentially pushing Brent crude to $90 per barrel. OPEC’s July 2025 plan to raise production by 411,000 bpd signals intent to maintain supply, but hesitation could amplify price volatility.

Will Saudi Arabia Step Up to Calm Markets?

Saudi Arabia, OPEC’s largest producer, holds a strategic pipeline bypassing the Strait of Hormuz, offering a buffer against potential disruptions. Analysts suggest Saudi Arabia could ramp up output to offset Iranian losses, as it did during past crises. Yet, with Brent at $74.72 per barrel on June 17, 2025, and global demand softening, Saudi Arabia may prioritize price stability over flooding the market.

The kingdom’s economic diversification efforts reduce its reliance on high oil prices, but political alignment with U.S. interests in keeping prices low could prompt action. OPEC’s cohesion will be tested if Saudi Arabia acts unilaterally.

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Can OPEC Prevent a Strait of Hormuz Crisis?

The Strait of Hormuz, through which 20% of global oil flows, remains a flashpoint. Iran’s threats to disrupt this chokepoint have not materialized, with 954 vessels passing through in the week ending June 16, 2025, up 5% from prior weeks. A closure could push oil prices to $124 per barrel, per Deutsche Bank estimates.

OPEC’s ability to counter such a shock depends on rapid coordination, but internal divisions and Russia’s influence in OPEC+ may slow responses. The U.S. Fifth Fleet’s presence in Bahrain deters Iran, but OPEC must prepare for worst-case scenarios to avert a global energy shock.

Geopolitical Tensions Challenge OPEC’s Unity

The Iran-Israel conflict exposes fractures within OPEC+. Iran, an OPEC member, may resist production increases by rivals like Saudi Arabia, especially if exports are targeted. Russia, a key OPEC+ partner, faces its own supply constraints post-Ukraine sanctions, limiting its role.

OPEC Secretary-General Haitham al-Ghais has criticized the International Energy Agency’s talk of releasing strategic reserves, signaling OPEC’s desire to control market narratives. With U.S. pressure on Trump to keep oil prices low, OPEC’s geopolitical balancing act grows complex, risking delayed or uneven responses.

Did you know?
During the 1973 Yom Kippur War, OPEC’s Arab members imposed an oil embargo on nations supporting Israel, quadrupling oil prices and triggering a global economic crisis, highlighting the cartel’s historical market influence.

Global Economy Faces Inflationary Pressure

Rising oil prices threaten inflation worldwide. A sustained $10 per barrel increase, as seen since early June 2025, could add 0.4% to consumer prices over a year, per a 2019 FXStreet analysis. In the U.S., gas prices may rise 20 cents per gallon in coming weeks, per ClearView Energy Partners. OPEC’s failure to stabilize supply could exacerbate costs for transport, agriculture, and manufacturing, hitting consumers hard.

The International Energy Agency’s downward revision of global demand by 20,000 bpd and upward supply forecast by 200,000 bpd suggest a surplus, but conflict-driven risk premiums keep markets on edge.

What Lies Ahead for Global Oil Markets?

OPEC’s spare capacity offers a lifeline to counter Iran’s potential supply disruptions, but its response hinges on Saudi Arabia’s willingness to act and the cartel’s ability to navigate geopolitical rifts. With the Strait of Hormuz under scrutiny and inflation looming, OPEC’s decisions will shape consumer costs and economic stability. Brent’s climb to $74.72 per barrel reflects a fragile balance—can OPEC prevent a full-blown energy crisis, or will conflict-driven volatility prevail?