Written by: Peyson Bilimoria
Looking at the size of Iran’s production, exports, and reserves of both crude oil and gas, it becomes clear that Iran stands as a major player at the forefront of global oil supply. According to various estimates, Iran holds the world’s second-largest gas reserves and third-largest crude oil reserves, representing 34 trillion cubic meters and 208 billion barrels, respectively (Avcıoğlu, 2026). According to the U.S. Energy Information Administration, almost all of Iran’s energy production comes from crude oil and natural gas, accounting for 43.4% and 55.7% of total production, respectively (EIA, 2024). However, exports are largely limited to crude oil, as although roughly 276 billion cubic meters of usable gas were produced in 2024, 260 billion cubic meters were consumed domestically (Avcıoğlu, 2026). Despite this domestic reliance on gas and the fact that Iran’s economy remains relatively diversified, especially compared to other Middle Eastern countries, energy exports remain a major source of income for the Iranian government. According to the EIA, Iran’s oil companies earned nearly 53 billion USD from crude oil exports, up almost 16 billion USD from 2021, largely due to rising global oil prices in 2022 and an increase in Iran’s total oil production (EIA, 2024). However, while a large part of their country’s revenue, oil exports from Iran are limited in the number of their final destinations. Looking at the largest buyers of crude oil, in 2023 Iran exported roughly 1.2 million barrels per day to China, 85 thousand to Syria, 42 thousand to the UAE, and 26 thousand to Venezuela, suggesting that China alone accounted for nearly 90% of Iranian crude oil exports per year (Avcıoğlu, 2026).
Iran’s export portfolio reflects its complex relationships with foreign actors and councils, particularly global sanctions and its participation in the Organization of Petroleum Exporting Countries (OPEC), an intergovernmental organization of 13 members, many of which represent the world’s largest oil-exporting countries. Under normal circumstances, Iran, as an OPEC member, would be required to abide by OPEC’s production cuts to help regulate the global oil market. However, due to their sanctioned status, they are exempt from these restraints (EIA, 2024). Since the Iranian Revolution of 1979, the United States has repeatedly employed sanctions in an effort to constrain the Iranian regime, largely through the use of oil sanctions, restricting US companies from purchasing or importing Iranian oil (Clayton). Similarly, the European Union, South Korea, Japan, Canada, and Australia have all instituted sanctions targeting energy-related investments in Iran in an effort to restrict Iran’s oil and gas projects. The U.N. Security Council also adopted sanctions between 2006 and 2010 under the goal of deterring Iranian nuclear weapon development, but those sanctions have since been removed (UANI).
Yet, as evidenced by its continued and significant presence in the global oil trade, Iran has sustained and expanded its global oil export market, primarily through the use of “shadow” fleets; ships filled with Iranian oil that either falsify documents, change their name and country mid-voyage, or transfer oil to other ships before reaching the final destination, in an effort to avoid international sanctions and tracking. A majority of these shipments arrive in China (Carsten, P., & Dutta, P. K, 2025). One of the most frequent ways Iranian oil companies use said “shadow fleets” is by relabeling their barrels under different nations. One of the most prominent examples is with China, where Iranian oil companies supplying oil to China frequently relabel their barrels as Malaysian, as the waters near Malaysia are notorious for unregulated ship-to-ship transfers. In fact, according to official documents, China imported over 1.3 million barrels per day of Malaysian crude oil, while Malaysia only actually produces closer to 500 thousand bpd (EIA, 2025).
One of the most critical geographic characteristics of Iran’s role in the global oil market is the Strait of Hormuz, the waterway between the Persian Gulf and the Gulf of Oman. In 2025, nearly 2.41 million barrels of Iranian crude oil and crude oil products per day were exported through the Strait, part of the 34% of all global crude oil trade that is shipped across it, a large majority headed to Asian countries, particularly China, Korea, Japan, and India. Moreover, limited bypass options or alternative routes exist. The International Energy Agency explains that, simply due to the sheer volume of oil exported via the Strait, disruptions to this route would have severe consequences for the global oil market. Such disruptions would cause immediate disruptions to shipments, not only directly impacting Asian markets but also significantly and inevitably raising crude oil prices worldwide (IEA, 2026).
The 2026 war in Iran provides a clear demonstration of the importance of Iran’s energy production and its geopolitical and geographic positioning to the global oil market, specifically its control over the Strait of Hormuz. Following the start of the conflict, the Strait of Hormuz effectively closed, initially due to the need for oil tankers to adjust their insurance and later sustained by military and security pressure, with Iran using military force to threaten the safety of many foreign vessels (Kilian, Plante, Richter, 2026). Bloomberg describes how, between the start of the Strait’s first closure in late February/early March and March 30th, the world’s entire oil supply, roughly 107 billion barrels, dropped by almost 18.5 billion barrels, or around 17%. Bloomberg further describes how, although during this period global oil prices reached record highs, they were likely understated due to several supply buffers, including lower demand from Asia and the release of global emergency stockpiles. If the strait were to remain closed for a multiple-month period, the impact on global oil supply and prices would be even larger (Bloomberg News, 2026). The Dallas Federal Bank compares Iran’s first closure of the Strait to previous geopolitical oil supply shocks, explaining how historically the largest shocks only reduced global oil flow by up to 4-6%, making the recent closure almost three to five times more impactful on the global oil supply than any previously recorded geopolitical event, attributing this fact to Iran’s strategic location and international relations. To further emphasize the importance of the Strait on the global oil supply and economy, and thus highlighting the influence Iran’s ability to open and close the Strait has on such measures, the Dallas Fed. adapted one of their recent study to demonstrate the effects the first closure might have had on the market had it lasted for three quarters. They predicted that such a closure would result in a 120% jump in global oil prices above baseline costs and a 1.5% decline in global real GDP, an impact the global economy would not recover from until well into 2027 (Kilian, Plante, Richter, 2026). Finally, despite the political and security uncertainty in the region and through the strait, Iran’s influence and control allowed it to continue making nearly $140 million per day on oil exports throughout the first month of the closure, largely through continued usage of shadow shipments, which saw a surge in usage throughout, benefiting from global uncertainty (Rodgers et al., 2026).
References
Avcıoğlu, M. (2026, March). Iran’s energy reserves, production and exports. Anadolu. https://www.aa.com.tr/en/economy/explainer-iran-s-energy-reserves-production-and-exports/3886706
Bloomberg News. The Strait of Hormuz Oil Shock Is Now Heading West. (2026, March 29). Bloomberg.com. https://www.bloomberg.com/graphics/2026-iran-war-hormuz-closure-oil-shock/
Carsten, P., & Dutta, P. K. (2025, January). How Iran moves sanctioned oil around the world. Reuters. https://www.reuters.com/graphics/IRAN-OIL/zjpqngedmvx/
Clayton, T. (n.d.). U.S. Sanctions on Iran. Gongress.Gov. https://www.congress.gov/crs-product/IF12452
Downs, E. (2026, January 29). Where China Gets Its Oil: Crude Imports in 2025 Reveal Stockpiling and Changing Fortunes of Certain Suppliers, Including Those Sanctioned. Center on Global Energy Policy at Columbia University SIPA. https://www.energypolicy.columbia.edu/where-china-gets-its-oil-crude-imports-in-2025-reveal-stockpiling-and-changing-fortunes-of-certain-suppliers-including-those-sanctioned/
EIA. (2024, October). Iran. U.S. Energy Information Administration. https://www.eia.gov/international/analysis/country/irn
IEA. (2026, February). Strait of Hormuz—About. International Energy Association. https://www.iea.org/about/oil-security-and-emergency-response/strait-of-hormuz
Kilian, L., Plante, M., & Richter, A. (2026, March). What the closure of the Strait of Hormuz means for the global economy. Federal Reserve Bank of Dallas. https://www.dallasfed.org/research/economics/2026/0320
Rodgers, L., Stylianou, N., Hancock, A., Cook, C., London, I. de la T. A., & Learner, Sam. (2026, March 25). How the shadow fleet is capitalising on the chaos of war. https://ig.ft.com/shadow-fleet
UANI. (n.d.). International Iran Sanctions Database. United Against Nuclear Iran. https://www.unitedagainstnucleariran.com/international-iran-sanctions-database