Iran’s Foreign Minister, Hossein Amir-Abdollahian, has urged all Muslim nations to impose an oil embargo on Israel, a move that has caused a temporary surge in oil prices. However, this call to action is more indicative of Iran’s vulnerability than its power.
Even if Muslim countries were to heed this call, which is highly unlikely, it would not significantly disrupt global oil supplies. Israel’s daily oil imports are approximately 200,000 barrels, a relatively small quantity in the global market. Even if all Muslim oil exporters were to impose an embargo, Israel could easily source oil from other countries, rendering the embargo largely symbolic.
The possibility of a broader oil embargo against the U.S. and other Western nations perceived to be supporting Israel is also minimal. The dynamics of the global oil market have evolved since the Arab OPEC states implemented curtailment measures in 1973.
Arab OPEC States No Longer Dominant
The U.S. and Europe are no longer the primary importers, and Arab OPEC states are not the dominant exporters they once were. As evidenced by the aftermath of Russia’s invasion of Ukraine, oil markets remain highly adaptable, even in the face of sanctions and restrictions.
Iran’s call for an oil embargo is a strategic move to exert pressure on Israel and rally international support, particularly within the Middle East and the Islamic world. This comes as Israel conducts airstrikes and plans a ground offensive in Gaza following the Hamas attack on Oct. 7. However, Iran’s threat is largely hollow, as it lacks the capacity to enforce such an embargo, and there is no willingness among Arab OPEC states to do so. Despite its rhetoric, Iran continues to steer clear of direct involvement in the conflict.
While the ongoing conflict in Gaza will keep oil markets on edge, the risk perception will largely depend on how close the conflict comes to involving Iran, including the implementation of U.S. sanctions. Although geopolitical concerns have caused a slight increase in prices, a significant surge is unlikely unless the situation with Iran escalates dramatically.