War in Iran and Oil Price Fluctuations: What Does This Mean for Azerbaijan?
The global energy market is once again on the brink of turbulence—amid military tensions in Iran, oil prices fluctuate day by day, and security threats to the Strait of Hormuz are prompting experts to predict a potential redistribution of energy flows.
These fluctuations have not spared the Azeri Light brand, which has long been a focus of attention on global markets. What risks do these price swings pose to the global energy market, and could they impact Azerbaijan's export potential?
We asked Ilham Shaban, a well-known energy expert and head of the Center for Oil Studies, to comment on the situation.
“The price of Azerbaijani oil is not determined on global exchanges. Our oil is sold directly at the port of Ceyhan, and it is there, between the seller and the buyer, that it is currently traded on global markets at a premium. In other words, the price is set by agreement between the parties. Therefore, we do not dictate the ‘weather’ on global markets. After all, we supply relatively small volumes to the market—just over 500,000 barrels per day. For comparison: one tanker holds about 1 million barrels, and it takes two days to fill it. Typically, we deliver 600,000 barrels to buyers via such tankers. Compare that to the global daily production of 103–104 million barrels of oil, to which we contribute only 0.5 million barrels.
The second question is whether the current crisis on the global oil market brings us any advantages. The fact is that oil prices began to rise even before the war in Iran started: back then, they were just over $70, and now they are around $90. There was a spike to $119.5, followed by a drop to $83. As long as the crisis continues, the price will likely remain around $90. Yes, this is significantly higher than the $65 budgeted in our state plan, but we don’t know when the war will end—next week, in 4–5 weeks, or perhaps it will drag on for an even longer period. That remains unknown.
The price of oil directly depends on the duration of the conflict and the persistence of military risks to tankers passing through the Strait of Hormuz. In reality, since March 2, they have effectively stopped passing through—not because Iran closed it, but simply because it is too dangerous right now. Consider this: the cost of a single tanker is $150–200 million. Why would anyone take such a risk? As a result, 300–400 vessels are currently anchored in the Gulf of Oman, and it’s unclear when they will move again.
Another very important point: there is hype in Azerbaijani media claiming that ‘the oil price in the state budget is set at $65, but now it’s being sold for $90–100, and that’s very good.’ However, it must be understood that this is a situational and unstable scenario. The price set in Azerbaijan’s budget is the average export price projected for 2026. And we don’t know what will happen after the war ends—will oil cost $40, $50, or fluctuate between $60–65? For instance, in January, the average price was $64. Data for February has not yet been disclosed. Neither the Ministry of Finance, nor the Ministry of Energy, nor SOCAR publishes this data monthly. Only in the middle of the year, from the State Oil Fund’s report, can we learn the actual export price for the previous year. And only by late September or early October, when the budget is presented to parliament, can we find out the average price for the first 9 months. In other words, this data is effectively disclosed only twice a year.
We know that crude oil is the ‘number one’ item in our exports among goods and services, accounting for about 60% of total exports. And, of course, if global prices are higher, revenues and transfers to our budget also increase. However, the real impact on Azerbaijan’s economy for the first quarter will not be known until the first half of April 2026, when the government publishes official data on budget revenues and the oil and gas sector in particular.”
As is evident, even if today’s high oil prices bring additional income to the global energy market and support the economic situation of exporters, the ongoing military risks and instability in such a critical transport route as the Strait of Hormuz create uncertainty.
The future movement of prices directly depends on the duration of the current geopolitical crisis and the associated risks to supplies. Thus, any forecasts remain speculative, and the real impact of these fluctuations may only become clear after the situation stabilizes.
