View / Why war in Iran won’t bring back $100 oil

Every time missiles fly over the Middle East, the same reflex kicks in: Traders panic, headlines scream about $100 oil, and columnists invoke the 1973 Arab oil embargo. After the latest strikes on Iran, we’re back in that familiar loop. The instinct is understandable, but the conclusion is probably wrong.

Yes, prices have jumped. Brent crude has climbed roughly 20% this year, and a geopolitical risk premium is baked into every barrel. But the fundamentals don’t support a sustained march into triple-digit territory — not unless oil flows through the Strait of Hormuz are significantly constrained.

Start with OPEC+, which met today against a backdrop of war sitting in tension with the millions of barrels of spare capacity the group has withheld for more than a year. The alliance’s instinct in moments such as these is not to cash in on chaos, it’s to head off the demand destruction that reliably follows high prices. Saudi Arabia, the UAE, and Kuwait have all signaled flexibility. They’ve done this before: When prices threaten to overshoot, they open the taps.

One question now is how much of that spare capacity is real. Outside a handful of core Gulf producers, many members may already be close to their practical limits, and the Iran shock will test their claims that they can pump significantly more.

And it’s not just the Gulf. Iraq, Kazakhstan, and several African producers have room to raise output, in some cases even faster than Gulf states. These countries have been producing below their potential for months. They can move. Russia is the exception: sanctions, shipping restrictions and the oil-price cap imposed by Western nations make it harder for Moscow to respond quickly, even if it wanted to.

The argument that OPEC+ will keep a lid on prices isn’t wishful thinking. A recession triggered by an oil shock is terrible for producers. A global energy transition that accelerates because prices stay high for too long is even worse. The Saudis are building a future economy and need stable, predictable revenues — not a one-year windfall followed by a global slump.

So where does the real risk lie? The Strait of Hormuz. About a third of the world’s seaborne oil moves through that narrow waterway. If it closes — or just becomes too dangerous for tankers to transit — spare capacity and market signaling become irrelevant. The shock would be immediate and severe.

Saudi Arabia can redirect exports through its East-West pipeline to Yanbu on the Red Sea. The UAE has built bypass infrastructure, too. But those are partial solutions. Iraq, Kuwait, and Qatar have no comparable outlet. Their exports will be trapped. And even the Saudi workaround comes with costs: Tankers departing from the Red Sea face a longer journey to East Asian customers and must pass through another chokepoint at Bab al-Mandab. Asian refiners will pay more, even if the benchmark crude price looks controlled.

For Tehran, closing Hormuz isn’t a free weapon. Iran exports oil through those same waters. It needs the cash to sustain its fight. A prolonged Hormuz blockade would be economic self-harm at the worst possible moment.

The war is real and the risks aren’t trivial. But the oil market is not as fragile as the headlines suggest, and OPEC+ is not standing by while the world burns. To forecast where oil prices go, watch the Strait, not the strike tallies.

Wael Mahdi is an independent commentator specializing in OPEC and Saudi Arabia’s economy, and co-author of “OPEC in a Shale Oil World: Where to Next?”