How a Regime Change in Iran Could Trigger Global Oil Price Shocks and Reshape Energy Geopolitics

Key Points

• Research suggests regime change in Iran could increase global oil prices due to potential supply disruptions.

• It seems likely that instability might affect Iran's oil exports, a key OPEC producer, leading to market uncertainty.

• The evidence leans toward higher prices if conflicts escalate, especially impacting the Strait of Hormuz, but outcomes depend on the transition.

Background

Iran is a major oil producer, ranking third in OPEC, with significant exports, especially to China. Any political upheaval could disrupt this supply, affecting global markets.

Potential Impacts

If regime change leads to instability, oil production and exports could drop, tightening global supply and pushing prices up. Historical events, like the 1979 revolution, show prices can triple during such crises. Current tensions with Israel add to the risk, with analysts warning of price surges above $100 per barrel if shipping routes are disrupted.

Market Reactions

The market is already reacting, with Brent crude up 10% recently, but prices could spike further with escalation. However, some suggest lifting sanctions post-change might lower prices, though this is less likely short-term.

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Survey Note: Detailed Analysis of Regime Change in Iran and Global Oil Prices

This note provides a comprehensive analysis of how regime change in Iran could impact global oil prices, drawing on historical data, current geopolitical dynamics, and expert opinions. As of 01:16 PM PDT on Saturday, June 21, 2025, the situation remains fluid, with ongoing tensions between Israel and Iran influencing market expectations.

Iran's Role in Global Oil Markets

Iran is a critical player in the global oil market, being the third-largest crude oil producer within OPEC. In May 2025, Iran produced approximately 3.4 million barrels per day (bpd) and exported about 1.7 million bpd, with China as its largest importer

. These exports account for roughly 1.6% of global oil demand, a seemingly small share, but disruptions in such a key producer can have significant ripple effects, especially given the region's geopolitical importance.

The Strait of Hormuz, a 21-mile-wide chokepoint through which 20% of global oil and 20% of liquefied natural gas (LNG) flows, is particularly vulnerable. Any disruption here could severely impact global supply chains, amplifying price volatility.

Historical Context and Precedents

Historical regime changes in oil-producing countries provide insight into potential impacts. The 1979 Iranian Revolution is a notable example, sparking the world's second oil shock in five years. Strikes in Iranian oil fields began in autumn 1978, reducing production by 4.8 million bpd, or 7% of global output at the time

. This led to a net loss of 4-5% in global supply, with oil prices rising from $13 per barrel in mid-1979 to $34 per barrel by mid-1980, and spot market prices reaching $50 per barrel. Panic buying doubled the actual shortage, and concerns of crisis spread fueled market speculation.

Another example is the 2011 Libyan Revolution, where oil prices rose from $93 to $130 per barrel due to supply disruptions

Event	Year	Impact on Oil Prices	Production Impact
Iranian Revolution	1979-1980	Tripled, from $13 to $34/bbl, spot at $50/bbl	Dropped by 4.8M bpd, 7% of global output
Libyan Revolution	2011	Rose from $93 to $130/bbl	Significant disruption, exact figures vary

This historical data suggests that regime change in Iran could lead to similar supply shocks, driving prices upward.

Current Geopolitical Dynamics

As of June 2025, tensions between Israel and Iran have already impacted oil prices. Brent crude has jumped by about $10 per barrel since early June, peaking at $78 per barrel, before cooling to around $72 per barrel, still below the $115 per barrel peak post-Ukraine invasion

Israeli actions, including bombing Iran's nuclear facilities and targeting its security establishment, aim to destabilize the regime, with some officials suggesting regime change could be triggered .

Potential Impacts on Oil Prices

Regime change could lead to several scenarios affecting oil prices:

• Direct Supply Disruptions: Political instability could halt or reduce Iran's oil production and exports, tightening global supply. Experts like Scott Modell from Rapidan Energy Group suggest that regime change could take more than 3 million bpd offline, a significant loss .

• Regional Instability: If Iran feels its survival is at stake, it might attack Gulf energy infrastructure or oil tankers, particularly in the Strait of Hormuz. Reports of Iran jamming ship transponders and warnings to vessels to avoid the strait highlight this risk .

• Market Speculation: Even without actual disruptions, fear can drive prices up. Rapidan sees a 70% chance the U.S. joins Israeli airstrikes, potentially rallying prices by $4-$6 per barrel if the Fordow facility is hit, with a 30% risk of prices surging above $100 per barrel if disruptions last .

Scenario	Potential Price Impact	Likelihood (Expert View)
Direct Supply Disruption	Significant increase	High, given historical trends
Strait of Hormuz Closure	Up to $120/bbl	Moderate, depends on escalation
U.S. Intervention and Stabilization	Capped below $80/bbl	Possible, per Rystad Energy

Alternative Perspectives

While the dominant view is higher prices, some X posts suggest alternative outcomes. For instance, @nah99313673 suggests an influx of cheap Iranian oil could reduce prices, stabilizing the region. However, these scenarios are less likely in the short term, given the current instability.

Historical X posts, like @Michele_Tafoya suggests the price impact might be smaller unless Iran retaliates against neighbors, potentially increasing prices by over $20 per barrel.

Expert Opinions and Market Reactions

Experts like Helima Croft from RBC Capital Markets warn that Iran could target regional facilities, exacerbating supply issues

The market has shown restraint, with prices up 10% since Israel's attacks, but remaining below $80 per barrel, suggesting some resilience. However, the potential for escalation remains a significant risk factor.

Conclusion

Regime change in Iran could significantly increase global oil prices due to potential supply disruptions, regional instability, and market speculation, with historical precedents supporting this view. Current tensions, especially involving the Strait of Hormuz, amplify this risk, with analysts suggesting prices could exceed $100 per barrel in severe scenarios. While alternative views suggest lower prices if sanctions are lifted, the immediate outlook leans toward higher prices given the ongoing conflict and uncertainty.

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Key Citations

• How regime change in Iran could affect global oil prices long title

• Iran and Israel crisis what does it mean for oil prices long title

• What Iran’s 1979 revolution meant for oil markets long title

• How regime change in Iran could affect oil prices NBC New York long title

• How regime change in Iran could affect oil prices NBC Bay Area long title

• How regime change in Iran could affect oil prices NBC 5 Dallas long title

• How regime change in Iran could affect oil prices NBC4 Washington long title

• Global oil prices soar after Israel attacks Iran long title

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