Trump’s “Maximum Pressure” on Iran Returns - But Will It Matter for Oil Prices?

Key Takeaways:

Iranian oil won’t vanish overnight and Trump’s past sanctions never fully eliminated Iran’s exports
OPEC+ holds the real power with 6 million barrels per day of spare capacity to offset any lost supply
Markets are cautious, not convinced with limited moves in oil prices thus far

In a move hearkening back to his first term, President Donald Trump signed an executive order this week reinstating "maximum pressure" sanctions on Iran. While Trump aims to drive the country’s oil exports to zero, energy markets barely reacted. Does this tepid reaction reflect skepticism about the President’s ability to enforce his policy, or is the market already pricing in the expected disruption?

Alex Hodes, Director of Market Strategy on the StoneX Energy Desk, says the market has seen this playbook before. During Trump's first presidency, Iranian production fell from 3.9 mbpd (million barrels per day) to as low as 2.55 mbpd, though exports never fully disappeared. Sanctions evasion – through ship-to-ship transfers, shadow fleets, and discreet transactions with China’s independent refiners – worked in concert to keep Iranian crude flowing.

Biden’s presidency saw weaker enforcement of sanctions, allowing Iran to push exports back up to 1.68 mbpd. by 2024 - -a jump that accounted for more than half of global supply growth that year. With Trump signaling a return to strict sanctions, Hodes believes the key question is not whether Iranian barrels will come off the market, but how many.

“The market is already expecting barrels of crude to be removed,” Hodes explains. “The real question is enforcement - how aggressive will the administration be in pressuring buyers? Our base case is that about 400,000 barrels per day could be displaced. But if Trump fully enforces these sanctions, OPEC has the capacity to fill the gap.”

Will OPEC Step In?

While Iranian oil exports remain a meaningful part of global supply, the market landscape has shifted. OPEC+ has an estimated 6 mbpd of spare capacity, which could offset lost Iranian barrels - if they choose to act. That dynamic means any disruption from renewed sanctions is unlikely to cause a severe supply shock. It also shifts the focus, with market watchers waiting to see whether OPEC+ chooses to compensate for lost Iranian barrels - and whether China remains a willing buyer.

Why Oil Prices Barely Moved

The market’s muted reaction to Trump’s executive order suggests traders thus far don’t expect immediate disruptions. Hodes believes that skepticism may be warranted as Iran has become more adept at evading sanctions, and enforcement will likely face challenges.

Hodes points out another factor: U.S. crude oil production has been slowing as companies prioritize capital discipline over aggressive expansion. Trump’s policies on domestic drilling may have limited near-term impact, making his relationship with OPEC+ even more critical in balancing supply.

The bigger risk? If Iran’s ability to sidestep sanctions is less than believed, or if enforcement is stronger than markets currently assume, tighter supplies could push prices higher. While today’s reaction is subdued, the coming months will determine whether Trump’s pressure campaign moves the needle - or if Iran’s exports continue to flow in the shadows.

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Read the original article here.

---Written by: Andrew Catsimanes

---Expert: Alex Hodes, Director of Market Strategy on the StoneX Energy Desk

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