Trump’s maximum pressure will squeeze Iran’s oil exports

Arne Bänsch/DPA via Reuters Connect

Oil markets had been expecting that Donald Trump, upon returning to the White House, would bring up the possibility of more sanctions against Iran. 

As expected, on February 4 the US president revived his “maximum pressure” campaign against Tehran via a national security presidential memorandum which aims to reduce Iranian oil exports to zero. Trump believes this strategy will prevent Iran from becoming a nuclear threat.

However, the memorandum’s scope is limited. Despite the bluster and attention-grabbing headline, it appears to be a continuation of the regular sanctions imposed under previous US leader Joe Biden. 

Trump’s comments can even be interpreted as one of his bold negotiating strategies to pressure Iran to accept a nuclear agreement. However, if that were the president’s intention, Iran disregarded the message.

“The language of negotiations is foreign to the United States. You cannot smile and say: ‘I want to negotiate with you’, and then issue a maximum pressure directive,” a spokesman for the Iranian administration said earlier this month.

Sanctions roll out

The US Treasury said in its most recent announcement that it would target nine crude tankers which are a part of a so-called “shadow fleet“, as well as several management firms in China, India and the UAE, which allegedly help Tehran move its oil. 

However, industry sources caution that this announcement should not be mistaken for the full-scale “maximum pressure” which Trump intends to launch. The exact timing of that campaign remains uncertain, adding to the volatility of oil prices.

Early shifts in Iranian exports are evident on the ground. According to independent global data source Kpler, Iran’s crude oil exports fell by about 138,000 barrels per day (bpd) from the previous month to 1.5 million bpd in January for the second consecutive month. 

What’s keeping the market relatively calm is the sizeable spare capacity cushion of Opec+

In early February, Iran’s floating storage ballooned to a 13-month high of about 30 million barrels, in a sign of the challenges that vessels face in reaching and unloading at their final destinations. 

Since the fourth quarter of 2024, the US has sanctioned about 80 vessels tied to Iran’s oil and liquids export. Kpler data shows that 49 tankers transport Iranian crude oil, which remains off the sanction list of the Office of Foreign Asset Control.

Industry sources say it is becoming increasingly difficult for Iranian oil sellers to secure new tankers, and it may become even more difficult if the US imposes stricter sanctions.

Competition and prices for securing vessels may surge if the US imposes further sanctions on oil exporters like Venezuela and Russia.

Given the uncertainty around securing supplies, Chinese independent refineries, traditionally the main buyers of Iranian crude, may purchase more non-sanctioned crude to replace barrels from Tehran over the coming months.

Squeeze on exports

During Trump’s first term (2017–21), stricter sanctions on Iran reduced its oil exports from approximately 2.8 million bpd in 2017 to just 400,000 bpd by 2020. However, under Biden, looser enforcement allowed exports to rebound to about 1.6 million bpd.

Some industry sources in Iran anticipate that renewed tighter sanctions can reduce exports by another 200,000 bpd.

What’s keeping the market relatively calm is the sizeable spare capacity cushion of Opec+, of about 3.9 million bpd, which can be deployed in the event of a supply disruption.

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But the question is: will Opec+ rush to bring more supply to the market? The answer depends in part on how long the group thinks Iran’s barrels will remain off the market, as Tehran is no stranger to developing creative tactics to bypass sanctions. 

Another factor Gulf producers may consider is preserving links with Tehran, which may prevent a repeat of the 2019 strikes on Aramco facilities, which shut down 50 percent of Saudi Arabia’s production capacity. Gulf powers are constantly mindful that putting maximal pressure on Iran may lead it to lash out.

In the unlikely scenario in which Tehran blocks the Strait of Hormuz, one of the most important chokepoints through which 20 percent of the world’s oil flows, the outcome may be more dramatic depending on how long the obstruction lasts. 

Under that scenario, which is being raised by some industry sources in Tehran, oil prices may spike to $120 a barrel. 

One thing is sure: instability and uncertainty will be the theme of 2025, and the so-called “Trump factor” will only exacerbate the challenge for oil-exporting states. 

Even though traders typically profit from volatility, Opec+ members are expected to maintain their cautious approach to policymaking.

Amena Bakr is head of Middle East energy and Opec+ insights at Kpler