Energy Prospectus

U.S. Sanctions on Iran Threaten Global Energy Markets
By Rystad Energy - Mar 26, 2025, 4:00 PM CDT

> New US sanctions on Iran, specifically targeting Chinese refineries, aim to increase economic pressure and compel Iran to renegotiate a nuclear deal, but these actions also risk disrupting global energy markets and increasing oil prices.

> China's cooperation is crucial for the US to achieve maximum pressure on Iran, as almost all Iranian crude exports go to China, and the effectiveness of the sanctions depends on whether China reduces or ceases its purchases. < The U.S. navy can also put an end to Iran oil exports.

> OPEC Plus's decision to increase oil production may provide the US with a strategic advantage in imposing stricter sanctions on Iran, as it could help offset any potential loss of Iranian exports and maintain stable global oil prices.

The latest round of US sanctions on Iran, which now targets Chinese so-called ‘teapot’ oil refineries—small, independently owned facilities—signals a growing determination to tighten the economic noose around the Tehran administration. With potential consequences reaching far beyond Iran itself, these moves could reshape geopolitics, disrupt the global economy and send shockwaves through energy markets.

While there is not yet a "maximum pressure" situation—where Iranian oil exports could drop from 1.5 million barrels per day (bpd) to near zero—Washington is stepping up efforts to push Tehran back to the negotiating table for a new nuclear deal. However, escalating pressure could drive oil prices higher, conflicting with US President Donald Trump's goal of lowering energy costs to fight inflation, as he promised in his January inauguration speech. Rystad Energy’s data on oil trade flows shows that almost all Iranian crude exports make their way to China, so achieving effective maximum pressure would require cooperation from the Chinese government.

Targeting a Chinese buyer may also signal pressure on China, the largest importer of Iranian oil, to reduce or cease its purchases. This is the fourth round of sanctions, and the pressure is intensifying with each one. Just days before, the US had revoked a sanction waiver that allowed Iraq to purchase electricity from Iran, further tightening the economic squeeze on Tehran,

Jorge León, Head of Geopolitical Analysis, Rystad Energy