Iran recently urged members of the OPEC oil cartel to unite against increasing U.S. sanctions. This call, made by Iran’s President Masoud Pezeshkian, came after former President Donald Trump directed his administration to tighten sanctions on Iran, aiming to cut the country’s oil exports to zero. Trump had previously asked Saudi Arabia and OPEC to raise oil production to lower global oil prices. With tensions rising, how will OPEC respond, and what is the West’s strategy moving forward?
The worst-case scenario for the West would involve OPEC members embargoing oil exports to the U.S. and its allies. These members control about 40% of the world’s crude oil production, 60% of the global petroleum trade, and over 80% of the world’s proven oil reserves. OPEC, founded in 1960, was created to coordinate oil policies and manage oil prices. In the past, OPEC imposed an oil embargo in response to the West’s support for Israel during the 1973 Yom Kippur War. As global oil supplies dropped, prices soared, and gas prices rose as well, given that oil typically makes up 70% of gas costs. The embargo lasted until March 1974, when oil prices had increased by about 267%, from $3 per barrel to nearly $11, contributing to an economic slowdown, especially in Western nations that relied on oil imports. With the current disruptions to global energy markets, including the loss of Russian oil supplies since the 2022 Ukraine invasion, an embargo today could have similarly drastic effects on oil prices.
However, up until recently, OPEC was unlikely to take such drastic action. Iran’s previous call for an embargo in November, under President Joe Biden, went unanswered, as many OPEC leaders showed little respect for Biden. Saudi Arabia and the UAE even declined his calls for assistance in lowering oil prices during the aftermath of the Ukraine invasion. The shift in U.S. foreign policy under Trump has been notable. While many had expected a continuation of his isolationist stance, there are signs that his second term, if he returns to office, would focus on reasserting U.S. global influence. This reassertion could include pressuring OPEC to lower oil prices to fit his preferred price range of $75–80 per barrel.
The tension between U.S. and OPEC interests has become evident, especially as oil price targets differ between the U.S. and Saudi Arabia. Saudi Arabia’s budget breakeven price for oil in 2025 is $98 per barrel, significantly higher than Trump’s target. These differences could exacerbate tensions between the West and the Middle East, especially if the U.S. continues its push for a strategic rebalancing in the region.
The situation has worsened following Trump’s controversial plan to take control of Gaza and resettle Palestinians. This proposal, which he suggests might involve military force, has angered many in the Arab and Islamic world, as it challenges longstanding views on the Palestinian-Israeli conflict. Iran and other regional players are likely to see this as an opportunity to unite against U.S. influence, while radical groups could be further fueled by the growing pressure on Iran and Russia, with China offering additional support. Trump’s comments could be part of a broader Middle East strategy, possibly paving the way for a new nuclear deal with Iran and improved relations between Saudi Arabia and Israel. Such a deal could also involve OPEC adjusting its oil production levels to maintain lower prices, aligning with Trump’s strategy.
In conclusion, the relationship between the U.S. and OPEC is increasingly strained, and the outcome of Iran’s call for action could shape the future of global oil markets, with potential for further political and economic disruptions.
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