Global Oil Market under pressure: Crises in Venezuela and Iran

While oil flows through pipelines and tankers, its prices are shaped by politics, power, and conflict. Recently, Crude oil prices soared, reaching their highest in months due to rising possibility of US strikes on Iran. Similarly, at the time of the arrest of Venezuelan President Maduro, there were speculations and pressures in the oil market, which caused a bearish trend in the oil prices. Overall, both these geopolitical events have caused volatility in the oil market. 

Let’s dive into the details of why US control on Venezuelan oil has a long-term impact and why the Iranian crisis possesses more risk as compared to Venezuela.

Venezuela: 

On 3rd January, 2025, under “Operation Absolute Resolve”, the US launched a military strike and captured incumbent Venezuelan President Nicholas Maduro, and his wife Cilia Flores. The US had charged the president with a conspiracy of committing narco terrorism and importing cocaine illegally, and possessing machine guns against the US. Following the raid, Trump's press conference made clear that oil was also a motivation for the action in Venezuela. Trump also said US oil companies would move in to fix infrastructure, "and start making money for the country”

Venezuela possesses one of the world’s largest proven oil reserves, about 300 billion barrels of proven oil reserves, which is around 17% of the world’s total, but decades of mismanagement, sanctions and poor infrastructure have severely weakened actual production and exports. Most of the Venezuelan crude is “heavy”, similar to that from Canada’s tar, which makes it difficult to refine and increase its production in a short period of time. Though, J.P. Morgan Global Research has projected Venezuela’s oil production could realistically ramp up to 1.3 to 1.4 million barrels per day (mbd) within two years of a political transition. When US President Donald Trump asked for at least $100bn (£75bn) in oil industry spending for Venezuela, he received a lukewarm response at the White House as one executive warned the South American country was currently "uninvestable".

CEOs of the biggest US oil firms who attended the meeting acknowledged that Venezuela, sitting on vast energy reserves, represented an enticing opportunity. But they said significant changes would be needed to make the region an attractive investment. No major financial commitments were immediately forthcoming. Chief Economic Advisor Claudio Galimberti of Rystad Energy said, "It's going to be difficult to see big commitments before we have a fully stabilised political situation and that is anybody's guess when that happens. We can infer from his statement that an increase in investments depends on a fully stabilized political situation.

This explains why Venezuelan oil does not pose an immediate supply shock to global markets, but instead represents a gradual increase in supply over time, which can exert downward pressure on oil prices in the long run rather than causing short-term volatility.

Iran: 

Iran, one of the largest producers of OPEC, by contrast is more crucial for changes in oil prices as of now. The political scenario and further deterioration of US-Iran relations will determine the movement of Brent prices.

On Dec 28th, as 1 dollar was equal to 1.48 million rial, it set off a series of protests by merchants and ordinary Iranians. These protests started from Tehran’s central bazaar and later spread to all 31 provinces. As per Al Jazeera, the crackdown on protests in Iran has resulted in multiple deaths and an internet blackout. On 8th Jan, 2026, US President Donald Trump urged Iranian demonstrators to "keep protesting" and threatened military intervention if security forces kill them. During 11-12th January, the US imposed a 25% tariff on any country trading with Iran and lastly, on 23rd Jan, Donald Trump announced that  an American “armada” is heading towards the Middle East and that the US is monitoring Iran closely, as activists put the death toll from Tehran’s crackdown on protesters at 5,002. This caused a rebound in oil prices, raising concerns of military action that could disrupt crude supplies. Brent crude futures for March rose $1.68, or 2.6%, to $65.74 a barrel.

Any curious reader would ask why any potential attack on Iran will create supply disruptions. There are two major reasons behind this: firstly, as mentioned above, Iran is one of the largest oil producer in the world, and a member of OPEC i.e., Organisation of Petroleum Exporting Countries. The second reason is Iran’s control over the Strait of Hormuz, which connects the Persian Gulf and the Gulf of Oman. This strait is a major route for the supply of oil from gulf countries to the world. Moreover, since Iran is facing sanctions by the US, it uses “ghost fleets” to escape sanctions and supply oil to countries like China. As per The New York Times, Ghost fleet includes the ships that often obscure their identities at sea by broadcasting and painting fake vessel names on their hulls, as well as by flying false flags. They often change their names, and their flags regularly. Ghost fleet ships also hide their routes and locations, either by turning off their location transponders, and going dark, or by falsifying, or spoofing, their locations to make it appear they are elsewhere. This ghost fleet network becomes vulnerable if the US increases its presence in the Middle East.

Therefore, tensions surrounding Iran are not merely a geopolitical concern but a global economic one. Oil price fluctuations driven by such instability have far-reaching consequences for energy-dependent economies.

Implications for India’s Energy Security:

Another important question that must have crossed your mind is whether this disruption in supply will also affect energy security in India. The answer is yes.

India imports around 85% of its crude oil requirements and is therefore sensitive to global price movements. India sources only about 1% of its crude oil imports from Venezuela and Iran (negligible currently due to sanctions), shielding Indian players from any material adverse impact. But even if the oil is sourced elsewhere, global price spikes affect India's import bill, current account deficit, and domestic inflation, influencing the Reserve Bank of India's policy decisions.

Conclusion:

Both Venezuela and Iran highlight how geopolitics continues to shape oil market movements, though in very different ways. Bloomberg NEF estimates Brent crude to average around $55 per barrel in 2026, assuming the situation in Iran does not disrupt global oil markets. However, in an extreme and currently unlikely scenario where Iran’s oil exports are completely removed from the market from February onwards, Brent prices could rise sharply, averaging close to $71 per barrel in the second quarter of 2026. This underlines why Iran remains a key short-term risk factor for global oil prices.

On the other hand, any increase in Venezuelan oil supply would have the opposite effect. As production gradually recovers with improved investment and infrastructure, additional supply from Venezuela would ease market tightness and contribute to lower oil prices over time.

While neither country has yet triggered a structural collapse in global oil supply, both significantly increase uncertainty and price sensitivity in the market. 

Ultimately, the future trajectory of oil prices depends less on current supply-demand balances and more on the unpredictable nature of U.S. foreign policy and its approach toward sanctioned oil-producing nations.

By - Rishita Sharma