War in Iran and Tensions in the Middle East: What Impact Will This Have on the Oil Markets?

In September, the average price of North Sea Brent crude reached its second-highest level of the year. This very high price is part of the surge in prices triggered by geopolitical tensions in the Middle East, notably the war in Iran launched by the United States and Israel on 28 February 2026. Iran’s strategy of blocking the Strait of Hormuz has significantly reduced global supply and contributed to a reorganisation of oil flows. What is the current state of the oil markets? What positions are being taken by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), the United States and China? In the face of this crisis, how has the European Union (EU) reacted, and what levers does it have at its disposal? We take stock with Francis Perrin, Director of Research at IRIS.

In September, the price of oil reached its highest level since April. How can such a rise in prices be explained, and what conclusions can be drawn regarding the impact of conflicts in the Middle East on the oil markets?

In September, the average price of North Sea Brent crude was 114 dollars (USD) per barrel, which is a very high level. This is the highest figure in 2026 after April (just over 117 dollars per barrel). Furthermore, for the period January to September, the average (just over $93 per barrel) was the highest since 2022 ($100.80 per barrel over 12 months), a year marked by the start of the second war in Ukraine. On 27 October, Brent closed at around $114 per barrel.

The surge in prices of crude oil and refined products is the primary consequence of the war in Iran and of Iran’s strategy to block the Strait of Hormuz, one of the world’s most strategic straits through which ships (tankers) normally carry around 20 million barrels a day of crude oil and refined products. Iran has also targeted and struck numerous energy facilities in the Arab Gulf states, particularly oil and gas installations. In addition to driving up prices, Iran’s strategy has led to a fall in oil production and exports from the Middle East, thereby reducing global oil supply. This decline has been particularly sharp for refined products, notably diesel and aviation fuel, the prices of which have, in fact, risen much more sharply than crude oil prices. The price of a barrel of diesel is thus almost twice that of crude oil… It has also caused a sharp fall in oil revenues for the Arab Gulf states, for whom oil is obviously an essential resource, and is seriously jeopardising their economic model.

Faced with this fall in global oil supply, oil-importing countries – at least those with the means to hold strategic stocks of crude oil and refined products – have released a significant proportion of these stocks onto the market to curb soaring prices and the risk of shortages. This applies in particular to the member countries of the International Energy Agency (IEA, Paris), which comprises 32 member states, and the People’s Republic of China. Oil companies, for their part, have drawn down their commercial stocks. According to the IEA, global oil stocks are estimated to have fallen by 509 million barrels between the pre-war period in Iran and the end of September 2026 (1 barrel = 159 litres). On 11 March, the IEA decided to release 400 million barrels from its strategic reserves onto the market, a historic record for the agency, which was established in 1974.

There is one positive point, however. For several weeks now, the volumes of crude oil exported by the Arab Gulf states have been much higher than before, as numerous tankers have managed to pass through the Strait of Hormuz under US military protection. Added to this is the crude oil exported via three pipelines bypassing the Strait of Hormuz (Saudi Arabia, the United Arab Emirates and Iraq–Turkey). However, as noted above, oil prices remain very high because there is still a great deal of uncertainty; Iran’s threats are not to be taken lightly; and rumours of imminent US and Israeli strikes against Iran following the US mid-term elections on 3 November are helping to maintain strong upward pressure on oil prices.

In the face of a reorganisation of oil flows, what positions are the countries of the Organisation of the Petroleum Exporting Countries (OPEC+), the United States and China adopting?

OPEC+, which has comprised 21 countries since 1 May 2026, decided to raise its production ceiling on several occasions between April and September before freezing it in October and November. These increases were largely theoretical given Iran’s blockade of the Strait of Hormuz, but they demonstrate this coalition’s determination to continue supplying the global market. However, on 1 May, OPEC+ and OPEC (currently comprising 11 member states) lost an important country: the United Arab Emirates (UAE), a major oil producer and exporter. This withdrawal, which is partly linked to the war in Iran and to differences with other Arab countries, including Saudi Arabia, can also be explained by the fact that the UAE had for some time been dissatisfied with the production quota allocated to it by OPEC+. The country had invested considerable sums to increase its production capacity and found itself constrained by a quota that had become too low. The UAE is also a country that is well advanced on the path to economic diversification. This withdrawal from OPEC and OPEC+ is also a means of drawing even closer to the United States and the Trump administration, which is no great friend of OPEC and OPEC+.

Unsurprisingly, the United States is playing a key role. It has been blocking Iranian ports since 13 April, apart from a period of around three weeks between 20 June and 10 July 2026, and has been escorting tanker convoys since August. These actions have helped to drastically reduce Iran’s oil exports and significantly increase those of the Arab countries, thereby reversing the balance of power in the oil sector. The United States has also continued to increase its domestic oil production, which is expected to reach 14 million barrels per day by the end of the year – and that figure relates solely to crude oil. If other liquids, often associated with natural gas, are added to the crude, the total reaches a stratospheric level of around 22 million barrels per day. The country is by far the world’s leading oil producer; it exports oil (though it imports slightly more than it exports) and is a very large net exporter of refined products, which is of great significance in the current context.

As the world’s second-largest consumer and the world’s leading importer of oil, China is deeply concerned about the war in Iran and its consequences, particularly in relation to oil. The country has reduced its oil consumption and significantly cut its oil imports, which has gone a long way towards mitigating the impact of the 2026 crisis on the global oil market. China has drawn on its reserves, which are very substantial. Although it supports Iran, it has no desire whatsoever to see that country block the Strait of Hormuz and never misses an opportunity to emphasise the need to find a diplomatic solution to this conflict. It has not played a very active role – at least not publicly – in seeking a solution to this war, but it supports Pakistan’s mediation efforts, which led, in particular, to a ceasefire in April. This ceasefire was very tenuous, but it did, however, significantly reduce the military intensity of the conflict. On 17 June 2026, Washington and Tehran signed a Memorandum of Understanding (MoU), but this quickly fell apart.

Faced with pressure from Washington, the G7 members – notably the European Union (EU) and France – have announced the release of up to 100 million barrels of oil and diesel over a four-month period. What does this announcement reveal about Brussels’ room for manoeuvre in relation to the United States, now the European Union’s main supplier of oil alongside Norway and Kazakhstan? What levers do the EU and France have at their disposal in the face of the current energy crisis?

Announced on 2 October, this G7 decision was in fact adopted under intense pressure from the US. President Trump had raised the possibility of halting US diesel exports, which would have further exacerbated an already very tense situation for this key commodity, given the situation in the Middle East and the war between Ukraine and Russia. One of the conditions attached to these 100 million barrels of crude oil and diesel is that Washington has committed not to restrict its energy exports to other G7 countries. The European Union (EU) then breathed a sigh of relief. However, the 2 October agreement also stipulated that the G7 would maintain its sanctions against Russia, which did not prevent Donald Trump from striking a deal with Vladimir Putin seven days later to allow Russia to export diesel to the global market and to the United States… This stab in the back for Ukraine and the EU proves, if proof were needed, just how highly the US President holds us in regard.

For the EU and its Member States, a mix of short-term, medium-term and long-term solutions is required. The French President’s recent trip to the Middle East – aimed in particular at securing additional supplies of diesel – falls into the first category, as do the mobilisation of strategic reserves within the IEA and the relaxation of certain environmental regulations. The EU also appears to be rediscovering the strategic importance of the refining industry, which confirms that it is never too late to do the right thing. In the longer term, accelerating the energy transition makes a great deal of sense for a group of countries that are poor in fossil fuels and are bearing the brunt of the disruptions in the global oil market.

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This article has been translated from French into English using artificial intelligence.