Iranian oil exports to rise
Iran’s oil
production is estimated to
average 3.1 million barrels per day this year, which would be the highest
reading since 2018—the year then-US President Donald Trump withdrew from the
nuclear deal and reimposed sanctions on Tehran. This will be in stark contrast
to the Middle East’s other major oil exporters, which unlike Iran are mostly
subject to OPEC curbs ‑ output from Iraq, Kuwait, Saudi Arabia and
the UAE is seen falling this year. As a result, Iran’s economy is
expected to grow more quickly than the
Middle East and North Africa average in 2024.
Further sanctions to be ineffective
Though Western
nations are reportedly readying further sanctions on Iran’s oil sector, they
are likely to miss the mark, given Iran’s considerable experience and skill at
averting sanctions, and the fact that almost all the country’s oil is already
being sold to China, not the West. US President Joe Biden is unlikely to push
hard to enforce sanctions given that lower oil supply could spur already-persistent
inflationary pressures and dampen
his chances of beating Trump in the November elections.
Iran’s economy to be subdued domestically
Deteriorating
geopolitics may not overly harm the oil sector, but the same is not true of
domestic demand. The national currency has depreciated by over a quarter so
far this year in the parallel market as a result of political tensions, which
will leave Iran with the unenviable record of having the region’s
second-highest inflation rate this year after Lebanon. This will entrench
already tough domestic economic conditions and hit consumer spending and
investment in turn.
Conflict with Israel is the elephant in the room
The probability is that
there will be no all-out war between Iran and Israel. If this were to
occur—which is not off the table, given the hawkish military leadership in both
countries and the high risk of political miscalculation—all bets would be off,
and Iran’s economy would quickly wave goodbye to its current resilience.
