Iran Uprising Portends Energy Market Turmoil

By Daniel Markind

2026 begins with the ruling Mullahs in Iran facing their most serious internal challenge, ever. What began as a mere strike by merchants in the Tehran bazaar quickly turned into a nationwide uprising.

Of course, Iran’s rulers have dealt with large demonstrations before, but this one seems different. For one thing, the government quickly offered talks to the demonstrators, something that it has not always been willing to do, although there seems to be little coordination among the people on the streets that might warrant such an offer from the government.

For another, the near complete collapse of the Iranian economy, which has reached 1.420,000 Iranian Riyals to $1 amid 42% inflation, has made daily life in Iran nearly impossible.

Add to that the fact that, through a combination of corruption, draught, and sheer mismanagement, Iran literally is running out of fresh water, and the average Iranian citizen has little to lose by protesting the current regime or even seeking to bring it down.

Meanwhile, during the entire 47-year history of the Islamic Republic, outside observers have long speculated on the impact of the eventual removal of the regime, but this time that speculation would seem to have much greater urgency.

Certainly, should the regime eventually fall, any new government would first need to seek an end to the current economic sanctions that have long been imposed on the country by the international community.

The removal of such sanctions would then mean the return of Iranian oil to the world market. Surprisingly, despite international sanctions, Iran’s oil exports reached a 7-year high in 2025 (Source).

However, perhaps as a further indication of Iranian economic mismanagement, and despite this export gain, Iran’s Gross Domestic Product actually shrank by 0.6% in 2025, (Source), further underlining the depressing Iranian economic situation.

The preceding analysis notwithstanding, freed from international isolation, Iran might even reclaim its role as a regional economic power, and an international oil exporting power.

Iran certainly possesses proven reserves of 208-209 billion barrels of oil, ranking its reserves as either the third or fourth largest in the world, and possessing 12% of the world total overall. (Source).

Indeed, even without Iranian supply, oil markets are anticipating a huge glut in available oil in 2026, leading to expected depressed prices. (Source). Adding Iranian oil supplies to the predicted international mix can only exacerbate the current supply glut and adding even more downward price pressure.

Internationally, this could have fascinating geopolitical implications. Russia, which has continued to sell oil to European countries despite the sanctions placed on it from its invasion of Ukraine in 2022, would see even less revenue from oil and natural gas in 2026, straining its budget even further.

In addition, Arab countries such as Saudi Arabia and Kuwait, now faced with new pressures including a potential war between Saudi Arabia and the UAE over a breakaway region in Yemen, (Source), may also have to cut their budgets to face new realities, at a time of increased regional turmoil.

Brent crude prices already are down 19% from early in 2025. (Source). For the United States, lower oil prices would also be a boon to drivers and consumers, but may prove to be difficult for producers.

Indeed, one thing that might change this is the continuance of what already seems to be a cold, snowy winter in most of North America. Not only would this increase American oil demand, but it would also make transportation of oil more difficult.

This is especially true in the Northeast, where large cities like New York have no clear way to bring in much needed oil or natural gas.

Overall, the year 2026 starts with an expected glut in the oil market, combined with mass uncertainty, both international and domestic, about the extent of future oil supply.

In energy, as well as otherwise, the year 2026 brings instability everywhere. It will be a day-by-day proposition.