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The U.S. oil sanctions on Iran reduce flows of Iranian oil and create the possibility of conflict in the Straits of Hormuz where oil tankers carry supplies from Middle East producers to other countries. The sanctions lead to the unwinding of the nuclear deal Iran negotiated with the Obama administration. Another sign of how a change in administration leads to a reversal of policies and continued involvement of the U.S. in the region in different and unpredictable ways.

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Denning says that because of the enormous repercusions on Iran's economy of a war in the Persian Gulf, a more likely scenario is not the cutoff of supplies of Iranian oil altogether but a smaller list of buyers for Iranian oil, making Iran sell the oil at a discount. Saudi Arabia's and Libya's added production would bring more oil to the market. The impact will be larger on Europe because of the decline in the value of the euro, with Brent crude on a 12 month average basis costing 14% more now than in the peak price in 2008. By comparison in dollar terms the comparable figure is 4% higher for the U.S. At a price of Brent crude of $120 in 2012, according to Citigroup, energy costs would take up 9% of world GDP, putting pressure on a economic recovery in Europe and the U.S.

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A plan appears to have been put in place by the U.S. and the European Union countries to strengthen the American position in negotiations with Iran underway in Istanbul. The impact on oil prices and on U.S. and E.U. growth as a consequence of higher oil prices, especially when the eurozone countries faced lowed growth, was one of the ways Iran hope to blunt the tightening of sanctions against Iran's nuclear program. It now appears from information released by the International Energy Agency that a plan was implemented by the Saudis in recent months to build up reserve supplies. At the same time a similiar effort was being implemented to increase production in Iraq and Libya so that it would add to reserves added by the Saudis. Daily output from OPEC countries increased by about 1.4 millon barrels in the Sept 2011- March 2012 period, as the confrontation with Iran took shape with increasing pressure using sanctions on Iranian oil, according to the IEA. Of this 1.4 million barrels a day increase, one third is from the Saudis and the rest from Iraq and Libya, according to IEA. In March 2012, OPEC oil production increased by 135,000 barrels a day to 31.4 million barrels, mostly from higher output in Iraq. The Saudis have filled up domestic oil inventories and placed an additional 10 million barrels of oil in storage close to markets in Europe and Japan. This suggests that this was part of a quietly implemented plan in cooperation with the U.S. and the EU countries to increase the effectiveness of sanctions and protect global oil supplies from disruptions; even as the U.S. pressured Japan, S. Korea, India and other countries to reduce purchases of Iranian oil. The economies of India, the EU and other countries were already beginning to feel the impact of higher oil prices in the 1st quarter of 2012....

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Iran Ceasefire shaky May 11 2026 with no willingness on the part of IRGC Iran (Iran Revolutionary Guard Corps) to send all nuclear materials out of the country. Past experience has shaken American confidence in IRGC Iran's willingness to give up nuclear weapons development. Under president Obama some nuclear materials were sent to Russia, some left inside Iran which were after an agreement used by IRGC Iran to develop weapons grade enriched uranium, putting the situation back to where America started before the agreement. This is behind the DJT Republican administration's effort to get all nuclear materials out of Iran. This has wasted another decade for Iran, diverting resources needed for improving standards of living and cost of living to the weapons programs. The result is internal protests that were widespread in Iran including the middle class, not just students. So that today Iranian people are divided on the issue whether Iran should against all prevailing Middle Eastern and World opinion go for a nuclear weapon. The situation of clandestine development in North Korea and Pakistan of nuclear weapons is not existent today as the US is monitoring it constantly. Israel sees these weapons programs in Iran as a threat to its existence close to its borders in Lebanon and Iraq, which makes it unlikely that clandestine development is possible for nuclear weapons development anywhere in the Middle East. The UAE has also shifted its stance in favor of the US, Saudis want assurances, and India, Pakistan Egypt are in different ways seeking a denuclearized Middle East. This means the American DJT administration is NOT ALONE on this issue as the media in the US and Europe are presenting. Germany's Wadephul and Merz are closer to US thinking on this issue than the media says. Macron and Starmer are at popularity of less than 20% in France and the UK and do not reflect the opinion in France and Britain, and in Europe on this issue. In this sense the US is doing this for a safer world, for China, India, Brazil and EU, all the nations in the poorest parts of the world in Africa, Asia. These poorest nations which are bearing the brunt of this obsession with nuclear weapons development by IRGC Iran in a Middle East torn by 5 decades of wars from Kabul to Damascus, Baghdad to Tehran, by IRGC Iran (Revolutionary Guard Corps), as these poor nations confront lack of oil and fertilizer supplies. It does not come at a good time for even the largest nations about 3 billion people in China, India and Indonesia, Egypt which are suffering from the effects of oil shortages and fertilizer shortages when possibly at most about 40 of 90 million people in Iran support weapons programs, all others in Iran seeking a way out for better standards of living and living at peace with neighbors and the world. In that peacetime Middle East the Palestinian people could find solutions like the Irish people with the goodwill of all neighbors. ...

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Iraq is Iran's most promising market for gas exports. Iraq needs the gas for its power stations now that Islamic State has been decisively cleared from Iraq. Yet Iraq is having difficulty making payments to Iran for gas supplies because banks are not ready to handle the payments with the reimposed tighter U.S. sanctions and restrictions. The deputy head of media at the Electricity ministry in Iraq, Sadoun Shehan, told WSJ that transfer of money by Iraqi banks is prevented because of U.S. sanctions. U.S. sanctions were reimposed by the Trump administration after they were lifted in January 2016. The new sanctions prohibit gas exports from Iran. Iran had hoped to make the sales and also export to the European Union when sanctions were lifted. Iranian exports of gas that started in 2017 were itself delayed for 4 years by the war from Islamic State.  Iran has the second largest reserves of natural gas in the world. The Trump administration's sanctions have led to a drop of Iranian crude shipments by 29% in 3 months and added to upward pressure on oil prices to take prices to $80 a barrel. This issue has implications for India and China, particularly India as it faces both higher prices for oil and the tight restrictions in purchase of Iranian oil. ...

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See the BBC show geography of the Straits Hormuz of Iran and Saudi/Oman. Would Iran block the Straits of Hormuz, the narrow waters in the Persian Gulf where Oman, Saudi Arabia on one side and Iran on the other meet. At some points the corridor in the sea which is 20 miles wide at narrowest point, is 108 miles long, is only 6 miles wide for oceangoing tankers carrying a fifth of world oil supplies. The reason Iran woul be hesitant to do this are- Iran supplies China with discounted oil through these Straits. Iran central bank says $67 billion of its total oil exports go through the Straits Hormuz, 90% of it to China. China gets a third of its oil supplies from the Saudis/Iran through these Straits. India gets 40% of its oil supplies, Japan 75% and South Korea 60% of crude oil supplies through tankers plying this waterway. It would put China and  all industrialized countries in opposition to Iran. It would also cut Iranian oil exports and leave it's oil based economy unfunded.   ...

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Straits of Hormuz 21 miles wide at its narrowest point in the Gulf where Iran faces Oman and Saudi Arabia.  Hormuz waterway that carries 90% of Iranian oil exports to China, 82% of all Asian oil imports, could be disrupted but it is very unlikely because of the $67 billion in oil exports from Iran according to its central bank, 90% of these oil exports going through Hormuz waterway go to China. It would be to unfund it's own oil based economy and affect China not the US or Germany. Germany gets most of its oil supplies from Norway, US and other sources, US is self sufficient after shale oil production surge.

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Khalid al-Falih, chairman of Saudi Aramco, says at the World Economic Forum in Davos, on Jan. 26, 2016- "If prices continue to be low, we will be able to withstand it for a long, long time." With $630 billion in foreign currency reserves the Saudis are following a long term policy of full production. Gasoline subsidies are being reduced, IPO of Saudi Aramco being discussed to raise additional capital, and other steps being taken to plan for long term oil prices. Flexibility for a change in policy is diminished with the addition of Iranian oil production to supplies following the lifting of sanctions. The events in 2015-2016 of Russian bombing campaign in Syria, and the cutoff of diplomatic relations with Iran, have worsened the standoff with Iran and Russia in the Middle East conflict. As a result it appears that the Saudis are settling down for a long term policy of full production which would keep oil prices low for the long term. India, Japan, China, the U.S. and the European Union, Turkey and other countries benefit from low oil prices when their economies need a boost in 2016-2017....

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WSJ looks at the 75 years of the US Saudi Arabia relationship that started when US president Franklin Delano Roosevelt met Saudi king Ibn Saud at Bitter Creek, Egypt, on a US Navy destroyer ship in 1945. It has gone through many phases over this period and mainly involved the Saudi kingdom maintaining its supply of oil to the US and Western Europe. This relationship went through an oil embargo during tense periods of Israeli Palestine conflict as in 1983 with an oil embargo that pushed up oil prices. What is different this time is the situation in Yemen where Iranian supported Houthi rebels near the border with Saudi Arabia are engaged in a conflict with the Saudis. Democratic administrations under first Obama and Biden today support reaching a deal with Iran on nuclear weapons development and limit US military support for the war in Yemen. The Saudis for their part are not keen on a regional war and turned down efforts by president Trump to respond to attacks from Yemen. Mr. Biden's envoy has arranged for a deal to reduce tensions between the Houthis in Yemen and Saudis. The diplomatic impasse in relations stems from the Kashoggi incident and president Biden's concern for the human rights situation in Saudi Arabia. Other factors making relations difficult are the economic interests of the two countries diverging. The relationship Roosevelt started in 1945 has changed in its fundamental character. Oil supplies for imports into the US is no longer a factor for the US which was the original interest of president Roosevelt in Saudi Arabia. This changed by 2015 as the US fracking industry enabled US to become self sufficient in oil and able to supply LNG to western Europe. Instead of the US Saudi oil now goes to China. Russian oil also goes to China as its industry expanded with American investment. This has led to a new Saudi relationship with China which has changed the dynamic of the American Saudi relationship. Some of the new aspects of this can also be seen in Saudi relationship with South Asia. Saudi ties have increased with India and India in 2021 was the first country to provide vaccine supplies to Saudi Arabia. Saudis, Qatar, United Arab Emirates are building relationships with India as a close neighbor in the region. Relationships are in some ways improving in the Asian region compared to the period when oil was simply exchanged as a commodity for defense supplies from the US without regard to cultural, educational and other changes in Saudi society. In a sense US and Western Europe paid little attention to the huge democracy of over 1 billion people right in the middle of Asia and followed policies that led to major investments in China and little or no investment in India, and without realizing it followed a policy that the British had pursued in the British Empire of treating different communities and religions as separate as opposed to one community of people in South Asia that were engaged in modernizing, building infrastructure and changing centuries old ways of living. The British Empire was sustained by this kind of thinking, and as long as Indians were complacent and lacked the will to make their aspirations for a better life and infrastructure for modernization this kind of thinking prevailed. The economic crises in Asia have reinforced the idea that there is one community entirely focused on development and modernization in South Asia. The people in South Asia care most about the cost of living and the infrastructure and services for the quality of life they live and their children can aspire for- same in European Union that chose the Greens and chancellor Scholz, and same in the US that chose president Biden to invest infrastructure and people, the same in China and the same in India and the rest of Asia. This is the situation that the US and Britain, and the European Union are now beginning to learn and adapt to that is a constructive aspect of these changes to rebuild the connections and supply chains that were sorely neglected before now. ...

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DW.com shows the Straits of Hormuz where the Persian Gulf meets the Gulf of Oman before it meets the Arabian Sea facing India. Ships cross a narrow space of 2 miles in the narrowest point that is 21 miles wide in the Straits of Hormuz. The UAE, Oman face Iran in that area. 20 million barrels of oil by tanker traffic cross the Straits of Hormuz every day. India, China, Japan and EU depend on the Straits of Hormuz for oil supplies making it critical for sea navigation. Iranian parliament  has threatened closing of the Straits as aresponse to the US strike on nuclear weapons development sites. China and India lose cheaper oil supplies from Iran as a result of the Israel-Iran war. Russia, Saudis, UAE, Qatar, gain because it increases the price of oil supplies from Russia. Iran loses a source of oil revenue with damage to its oil facilities. The Israeli economy is resilient and its stock markets are showing rapid growth as the war changes the Gulf region and  Southwest Asia, South Asia moving it in the direction of economic and business deals and agreements that enhance improvement in the lives of the people away from decades of conflict from the colonial era in which the British and the French gained control of the Gulf region and Iraq, Syria after the collapse of the Ottoman Empire, the anti colonial regimes that failed to provide development, the CIA's intervention under Dulles and Eisenhower to remove the democratically elected government of Mossadegh in Iran in 1953 and its repercussions in the Reagan period with Rumsfeld/Reagan compounding that error by supporting Iraq's Hussein leading to 3 decades of loss of American lives in the region's wars and also endangering Israel. ...

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Relations between Iran and Arab Sunni states Saudi Arabia and UAE are improving especially as Arabs distance themselves from the Bush Administration after faulty inelligence estimates about Iran were corrected by the CIA concluding that Iran wasnot pursuing a nuclear weapons program. The Arab Sunni states arenot altogether happy with the US policy in Iraq and Palestine. Note that that even before this there is a stron economic link between UAE and Iran. About 400,000 Iranian expatriates live in the Emirates and 9000 part Iranian owned firms are registered with the Dubai Chamber of Commerce and Industry. One look at the map show why Dubai is closest to Iran just a short strip of water dividing the two countries. This bodes well for oil prices as any volatility in the region would only increase pressure on oil prices. Peace in the Gulf region would do a lot to decrease the volatility affecting oil prices. It would also give Iran confidence to address its own role as a supplier by modernizing its oil industry. See the link to Mexico where President Calderon wants to transform Pemex and Mexico's oil industry over 10 years after Petrobras was pushed into reform by President Cardozo in Brazil. Commerce and Industry...

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The earlier interactions between US and Iran have turned into an Iranian effort to develop its nuclear capabilities bringing the situation faced today, and showing the failure to find solutions of everything tried before and not helping the people of the Arab World and the Gulf regions.During the Reagan period American involvement under Defense Secretary Rumsfeld to support the Iraqi invasion of Iran in a balancing act. And just a year earlier the Democrat Carter's efforts to look at the Islamic revolution as a response to the CIA's intervention in Iran's internal affairs under Eisenhower's Foreign minister Dulles to secure oil supplies, and efforts to find a way to good relations with Iran. This was followed by the Democrat Obama negotiating with Iran, normalizing relations and Democrat Biden handing over Iranian assets  of hundreds of billions of dollars that were used DJT says to build its military that had suffered badly under the earlier western sanctions under Republican Trump.  It has led to some of the migration from Syria after Russian involvement that flooded Germany with millions of migrants and destabilized European countries democratic processes.  ...

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The complex relations of Jordan and Saudis with US and Israel, in June 2025.  There is also the perception and actions of the two American parties Republicans and Democrats that have exacerbated the situation. This see saw of relations under the two parties in the US has only served to exacerbate the relations and draw the US into Middle East conflicts that have their origins in British colonial rule and interests of western oil companies from 1900.  During the Reagan period American involvement under Defense Secretary Rumsfeld to support the Iraqi invasion of Iran in a balancing act. And just a year earlier the Democrat Carter's efforts to look at the Islamic revolution as a response to the CIA's intervention in Iran's internal affairs under Eisenhower's Foreign minister Dulles to secure oil supplies, and efforts to find a way to good relations with Iran. This was followed by the Democrat Obama negotiating with Iran, normalizing relations and Democrat Biden handing over Iranian assets  of hundreds of billions of dollars that were used DJT says to build its military that had suffered badly under the earlier western sanctions under Republican Trump.  It has led to some of the migration from Syria after Russian involvement that flooded Germany with millions of migrants and destabilized European countries democratic processes. These earlier interactions between US and Iran have turned into an Iranian effort to develop its nuclear capabilities bringing the situation faced today, and showing the failure to find solutions of everything tried before and not helping the people of the Arab World and the Gulf regions.   ...

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Experts at the East-West Center in Honolulu, say China will add about 55 million barrels to its strategic reserves in 2012, which is another factor that will keep oil prices high in 2012. A number of new storage locations are coming on stream to store the additional reserves. China imported 5.57 millon barrels a day in March 2012, an increase of 8.7% from the prior year month. Oil imports for the 1st quarter of 2012 increased by 11% over the prior year quarter, according to China's General Administration of Customs. This is a much faster pace than imports in 2011, which increased by 6%. China is building its strategic reserves to reach a goal of 90 days supply similiar to the U.S. strategic reserves. Lu Tienan, director of China's National Energy Administration, said at a conference in the first week of April that current total oil stocks, including strategic and commercial are enough for 40 days. It is doing this in the face of higher oil prices, because of the threat of sanctions against Iran's nuclear program could lead to a cutoff of Iranian supplies. China's oil imports from Iran were 11% of total imports in 2011, making this an urgent priority for China. Estimates of the East-West Center are for crude oil imports at an average of 5.77 million barrels a day in 2012, an increase of 13% over 2011. International Energy Agency estimates are for China's total oil demand for 2012 to be 9.9 million barrels a day in 2012, an increase of 6% over 2011....

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The Trump administration says waivers for China, India, Japan, South Korea and Turkey to import Iranian oil that expire in May will not be renewed. The decision is to have zero exemptions. Earlier Taiwan, Greece and Italy, also on the list, decided to find other sources of imported oil. Iranian oil exports are estimate to be below 1 million barrels a day compared to 2.5 million barrels a day before president Trump abandoned the Obama administration negotiated Iranian nuclear deal and reimposed oil sanctions. 

Saudis and UAE say they will keep the oil market in balance, and president Trump is also relying on U.S. shale oil supplies. The move faces resistance from China which says the U.S. has no jurisdiction to interfere. India haces issues with the U.S. for importing from not only Iran, but also Venezuela, Turkey and Iran are neighbors, India and Iran are neighbors, both with cultural ties to Iran, making the situation difficult for both countries.

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The Trump administration proposes a zero policy for Iranian oil imports which says the U.S. will grant zero exemptions to countries importing Iranian oil.  Big importers China and India are likely to resist this policy.

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Forecasts show global oil output exceeding demand by 630,000 barrels a day for the fourth quarter of 2012. This is partly the result of extra oil supplies coming in from Saudi Arabia to counter the situation with Iran at the same time as oil demand is slowing with the economic slowdown in the U.S., Europe and China. Prices of crude declined to $85.73 a barrel on the Nymex, and $107.85 for Brent crude on the ICE Futures Exchange on Oct. 24, 2012. Goldman Sachs cut the 2013 price forecast for Brent crude to $110 a barrel from $130. Earlier the QE III monetary easing by the U.S. Federal Reserve had rallied oil prices because of a weakening of the dollar.

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Note that Goldman Sach's analysts who first predicted that oil prices could reach $100 are now predicting that the downward momentum is building up. The prediction from them now is that prices may go up further than the $96 right now but should drop to $80 by April. Its not too difficult to see why. First on the supply side the momentum for downward shift is not so significant but still there are signs. The Iraqi oil flow disruption either from a Turkish invasion of norther Iraq or from internal disruption is shrinking as the Turks see this as a small operation at most, and the Iraqi law and order situation is improving. The Iranian situation may be stabilizing without US intervention possibilities shrinking. On the supply side the oil majors except for Total see their output shrinking somewhat, and OPEC has not increased supplies significantly as oil inventories have not built up as they do before winter. But overall the supply situation is stable. On the demand side is where the significant downward momentum exists. With the US economy slowing down amid the buildup of the housing tumble and the credit crunch which looks to get worse in 2008 before stabilizing in 2009 and a stronger euro and other factors affecting Europe's expansion oil consumption by industry in the industrialized countries is slowing. Much of the pressure on oil prices comes from increases in demand each year from China and India. Here gasoline is subsidized by the government and this reduces incenive for conservation. The policy of letting market prices be reflected at the pump to a limited degree so as not to seriously affect people is now taking hold in these countries. In China prices were raised 10% and there is likely to be further increase in the near future. This along with the increasing awarenes of the dependence on foreign oil and the need for conservation in both China and India should build pressures in both countries to make the best use of resoures and have users share some of the burden of higher prices. The American and European gasoline market is driven by a public that has not been too conscious of conservation especially in America. It appears that high oil prices have not encouraged conservation, witness that with rebates for higher oil prices and zero interest rates financing large pickups are still selling at levels of 2005, and there has not been a significant reduction in consumption at the pump. What may shift this equation now is probably government mandated fuel economy standards. Europe already has new standards and the automakers there are racing to meet it with new technologies, in America its now almost certain that public sentiment and congressional sentiment is likely to lead to similiar standards or at least significantly improved standard. Public sentiment is already pushing the automakers in the USA to introduce new models with higher fuel economy and use this as a n advertising and competitive edge. This reduction in gasoline consumption at the pump through new technologies in the industrialized countries and through price increases being allowed to flow through in the developing countries of China and India in a stable supply environment where the downward political risks are stable may be the pivotal turning point for the price of oil. ...