For a few days, the world breathed its breath. It seems that the conflict between Israel, America and Iran is not going to move forward at least now. Iran opted to save the face by launching an attack on the US military base in Qatar, which the stock market interpreted as a de-esclery gesture.
This ventilative strike by Tehran was “enough enough for the headlines, quite quite calm that not shaking the foundation of the oil market,” Spi Asset Management Stephen Inse commented to Reuters. Soon after the strike on Monday evening, the price of oil fell rapidly.
And yet Iran holds a powerful trump card. This can cause great damage to the global economy by blocking the straw of hormuz. But will it be real for its own benefit – or will it be more than one own goal?
Why oil export is so important for Tehran
The US Energy Information Administration (EIA) says that “Iran’s economy is relatively diverse compared to many other Middle Eastern countries.” However, goods produced by the country’s industry are mainly sold on the domestic market.
Hence export of oil and petroleum products is an important source of income for the government. The thesis is more than 17% of the country’s total exports, of which natural gas is 12%. According to the EIA, Iran was the largest producer of crude oil among OPEC countries in 2023, and in 2022 it was the third largest producer of dry gas (natural gas which is at least 85% methane, which contained negligible amounts of condensable gas only like hydrogen).
Iran exports oil despite restrictions
Although it has been subject to restrictions for many years, it has not prevented the Iranian regime from exporting oil. China has particularly benefited: In 2023, it took around 90% of the oil exported by Iran.
In March 2024, Iran’s Petroleum Minister, Financial Times Javad Ovji said that Iran’s oil exports generated “over 35 billion dollars” in 2023. According to the World Bank, between April and December 2023, the oil sector represented 8% of Iran’s GDP. And based on the estimates of the data analysis company Vortexa, it is believed that the next year has been exported even more.
China: An important business partner
Iran would harm itself there if it blocks the strainer of the hormuz. Not only will Oodigwn oil revenue affect, it will prefer its business partner China so much, which benefits from buying oil at low cost.
London -based TV station Iran’s international estimates that Tehran sells its oil at a 20% discount on the world market price, as its buyers get into trouble due to US sanctions. Broadcaster reported that Chinese refine is the biggest buyers of Iran’s illegal consignment of oil. The middlemen mix it with delivery from other countries, and then oil in China is imported from Singapore or other countries.
According to Ristada Energy, an independent energy research company based in Norway, China imports about 11 million barrels per day, about 10% of which comes from Iran.
The blockade will affect neighboring countries
A blockade would have caused trouble for Iran’s neighbors. Kuwait, Iraq and the United Arab Emirates therefore transport their oil through the route. In a post on LinkedIn, an analyst economist Justin Alexander, a Gulf region, commented that if Tehran was to shut down the Strait, it would “reduce the remaining alliance”. It is still with countries in the region.
Can Iran really maintain a blockade, so suspicious. Hayamun Falkshihi, from the analytics firm KPler, told German TV that he believes that a blockade wood provokes a sharp and powerful military reaction from both the US and European countries, and that Iran would be to close the strainer for only one or two days.
Iran’s struggling economy
Also, if Iran’s economic condition was to determine even more, it would go down very badly with Iranian people. The Economics Professor at Virginia Tech in the US, Djavad Salehi-Isafahani told DW that the standard of staying in Iran had already fallen to 20 years ago.
These not only apply to the oil industry, but for international payment transactions with Iran, which increases inflation. It has exceeded 38.7% in the beginning of the year in May 2025 as compared to May 2024. The combination of restrictions and low exchange rates is making daily life more expensive for people in Iran.
This article has been translated from German.
