About the author: Jeffrey J. Schott is a senior fellow at the Peterson Institute for International Economics and co-author of Economic Sanctions Reconsidered.
Over the past year, the Brent oil price has roughly averaged about $80 per barrel. Brent oil prices spiked to $88 a barrel after the attacks on Israel. This week trading started around $90 a barrel. Prices could stay elevated if sanctions impede Iranian oil exports. Goldman Sachs estimates that, under its baseline projections, a net one million barrels a day drop in world oil supplies would raise oil prices by $10 a barrel.
The best way to squeeze Iran’s finances is by increasing oil supplies on world markets, reducing consumption, and thus putting downward pressure on oil prices. That successful recipe a decade ago contributed to plummeting oil prices and significant, but only temporary, constraints on Iran’s nuclear ambitions and terrorist financing. Rising oil prices, especially since the Russian invasion of Ukraine, have provided an economic windfall for the Iranian regime that needs to be slashed.
U.S. officials also need to warn Iran’s economic benefactors that Iranian adventurism in the Middle East risks destabilizing vital energy markets on which they depend. Such calls will fall on deaf ears in Moscow given its need for Iranian military equipment for its war in Ukraine. Beijing might consider them, however.