War in the Middle East – What does this mean for the oil market?

The conflict between Israel and Iran escalated last Friday with Israeli attacks on nuclear facilities and military targets in Iran. Oil prices rose significantly as a result, with the price of a barrel of Brent crude increasing by up to 13% to just over USD 78 per barrel on Friday. This is due to concerns that the conflict could jeopardise a sufficient supply of crude oil for the global economy.

What role does Iran play on the oil market?

Iran recently produced around 3.3 million barrels of crude oil per day according to various surveys. There is no official data on Iran's oil exports and their customers due to the ongoing international sanctions. According to data from Bloomberg, Iran recently exported just under 1.7 million barrels a day, a good half of which probably went to China. This corresponds to around 4% of global crude oil exports.

Following the withdrawal of the United States from the nuclear agreement in May 2018 and the reintroduction of US sanctions, Iranian oil production fell to around 2 million barrels per day by 2020. Since the beginning of 2021, however, it has risen again despite the persistent sanctions, bringing it back to the level of autumn 2018. The sanctions imposed on the Iranian shadow fleet and some Chinese refineries as buyers of Iranian oil have so far only prevented a further increase in Iran's oil production and oil exports. They have not led to a decline.

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