The United States is thinking about whether it should take military action against Iran as problems continue to grow inside the country.
Iran’s government is weaker than it has been in many years. This has created instability in another major oil-producing country, coming shortly after the U.S. helped remove Venezuela’s government.
Across Iran, people have taken to the streets to protest. The government responded with force, and this crossed a serious line set by U.S. President Donald Trump. Because of this, Trump has suggested that the U.S. may take action against Iran. However, he also said the U.S. is still watching closely and has not made a final decision.
No matter what happens next, Iran will remain very important to the global oil market. The country has the third-largest oil reserves in the world and controls one of the most important oil shipping routes. These two factors will strongly influence Iran’s future, whether or not the United States gets involved.
Iran’s Oil Industry and Its Impact on the Lubricants Supply Chain
Iran remains a major player in the global petroleum landscape, producing around 3.2 million barrels of crude oil per day, according to OPEC. This accounts for nearly 4% of total global crude output, placing Iran among the top six oil-producing nations worldwide. What makes this position notable is that Iran continues to operate under strict international sanctions, which significantly restrict its access to traditional export markets.
To maintain crude flow despite these limitations, Iran relies on alternative export channels, including a shadow shipping network that moves oil at discounted rates. While this approach helps sustain production volumes, it also limits the country’s ability to fully capitalize on its upstream and downstream potential—especially in refining, base oil production, and lubricants manufacturing.
From a resource perspective, Iran’s long-term oil potential is substantial. The country holds an estimated 209 billion barrels of proven crude reserves, ranking just behind Venezuela and Saudi Arabia. Yet, current output levels remain well below historical highs. In the mid-1970s, Iran was producing approximately 6.5 million barrels per day, nearly double today’s volumes. This gap highlights the untapped capacity that could significantly influence global base oil availability and lubricant feedstock supply if production constraints were eased.
On the demand side, China dominates Iran’s crude oil exports, accounting for roughly 97% of total purchases in 2024, according to the US Energy Information Administration. This concentrated trade relationship mirrors patterns seen in other sanctioned oil economies and reinforces China’s role in shaping regional base oil and finished lubricant flows.
Like Venezuela, Iran also operates under a nationalized energy system, following the expropriation of foreign oil assets in previous decades—further impacting foreign investment and technology transfer in lubricant-grade refining.
However, Iran’s role in global energy markets extends far beyond that of Venezuela. Due to its larger reserve base, geographic positioning, and integration potential within Middle Eastern supply chains, any disruption or expansion in Iranian crude production can directly affect crude pricing, base oil feedstock stability, and lubricant production economics worldwide.
As energy analysts point out, changes in Iran’s oil output carry immediate implications for global oil and lubricants markets. Supply disruptions—or reintegration into mainstream trade—could influence everything from base oil pricing and additive demand to finished lubricant availability, especially in price-sensitive regions.
What Could Happen to Oil Prices?
Oil prices have already started going up because people are worried about problems with Iran’s oil supply. Recently, oil prices jumped above $61 per barrel after threats of an attack on Iran. Just one week earlier, prices had dropped to $56 per barrel when the U.S. promised to increase oil production in Venezuela.
If the United States attacks Iran, oil prices could go even higher. How much prices rise would depend on how big the attack is and how Iran reacts to it.
We have seen this happen before. In early June, oil prices went up by 7% and crossed $74 per barrel when tensions increased between Israel and Iran. But later that month, prices dropped again after the U.S. attacked three Iranian nuclear sites. This happened because the U.S. did not target Iran’s oil facilities, and Iran’s response was mostly symbolic, with missiles that were stopped before causing damage.
Still, Iran has the power to seriously disrupt the oil market if it wants to. Iran controls the northern side of the Strait of Hormuz, a very important oil shipping route. About 20 million barrels of oil, nearly one-fifth of the world’s daily oil supply, pass through this narrow waterway every day. It is the only route used to ship oil from the Persian Gulf to the rest of the world.
Because of this, even the threat of trouble in this area makes oil markets nervous. Experts say that if Iran blocks or controls this route, it could quickly reduce global oil supply and push prices much higher.
That’s why traders are feeling uneasy. Many are preparing for possible disruptions, fearing that the Strait of Hormuz could turn from a normal shipping route into a major pressure point that affects oil supply around the world.
What Happens If the Ayatollah is Ousted?
Iran has a more mixed economy than many people expect. Even though the country is under heavy sanctions, oil makes up only about 10% to 15% of Iran’s total economy. However, oil is still very important to the government because about half of its money comes from selling crude oil.
Experts say oil would stay important even if Iran’s leadership changes. The oil industry supports government spending, jobs, and trade, no matter who is in power.
Compared to Venezuela, Iran is in a better position. Venezuela’s oil system has been badly damaged over the years because of poor management and lack of investment. Iran’s oil infrastructure, on the other hand, is still in fairly good condition.
This means a future government would not have to rebuild everything from scratch. Instead, it could slowly increase oil production if restrictions were removed. In simple terms, Iran already has the tools—it just hasn’t been allowed to fully use them.
But this only works if a new government has better relations with Western countries. If global sanctions are lifted, Iran could sell more oil openly and legally. If sanctions remain, production would stay limited.
In the short term, a leadership change could actually push oil prices higher. That’s because markets dislike uncertainty. Investors would worry about who controls Iran’s oil industry and how stable the country would be during the transition.
Over the long term, though, a new and more open government could help lower oil prices. More transparency and increased oil supply could bring stability to the global market.
Even then, U.S. oil companies would likely move slowly. They would want to see clear political stability and strong safety guarantees before investing. Also, since oil prices are not very high right now, companies are careful about putting money into risky projects.
In short, Iran has huge oil resources, but investment and growth depend on one key thing: political stability. Without that, even the largest oil reserves can remain locked away.
Final Takeaways
Oil markets are trying to balance two things: the risk that problems between the U.S. and Iran could stop oil from flowing, and the chance that there might be too much oil available. Since the rules and actions are still unclear, traders are being careful. This keeps prices steady but ready to change if politics shift.
Editor-at-Large
A passionate writer in the lubricant industry, Awais Iqbal has been covering oils, greases, and industrial fluids since the start of his career. At 25, he’s already written for blogs, catalogs, and brand guides across the UAE. Awais’s insights help companies connect with their audience, and his clear, helpful writing style is trusted by brands in the region.
