Launceston (Australia), Aug. 3, 2026 – It would be easy to dismiss the decision by key OPEC+ members to raise September crude oil production quotas as a futile gesture amid tensions sparked by the conflict with Iran.
With the Strait of Hormuz barely open and the threat to the shipping route near Bab el-Mandeb unresolved, there is little chance the group of exporters will be able to ship what has been agreed.
Seven OPEC+ members that adhere to voluntary production cuts – Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman – agreed at Sunday’s meeting to raise output by 188,000 barrels per day (bpd) in September.
This completes the phased unwinding of cuts totaling 1.65 million barrels per day, introduced in 2023, when the organization still included the United Arab Emirates, which left OPEC in May.
While the quotas themselves are not decisive, the latest Reuters poll data show that the eight-member group with quotas produced 20.276 million barrels per day in June, which was 6.246 million below the target.
Russia, the main non-OPEC participant in the broader OPEC+ group, produced about 8.928 million barrels per day in June, according to OPEC, almost 1 million below the agreed quota.
Although the decision to unwind the voluntary cuts may not have a substantial impact on the current market, it underscores the challenges facing oil exporters and importers.
Three Possible Scenarios
The first scenario envisions Iran and the United States reaching a peace agreement that would ensure long-lasting and unobstructed passage through the Strait of Hormuz and Bab el-Mandeb.
The second option is that the conflict continues, alternating escalations and hopes for a ceasefire and a deal, but those hopes fade, after which rocket and drone strikes intensify again.
The third scenario envisions a prolonged escalation: U.S. President Donald Trump orders strikes on civilian and energy infrastructure, and Iran responds with similar actions against countries hosting American bases, such as Saudi Arabia, Kuwait, and Iraq.
At present, the market is pricing in the first scenario: Brent futures in early trading were down about 6.8% and trading around $83.98 per barrel.
Prices are now about 34% below the peak of $126.41 per barrel recorded during the April clash with Iran, but about 16% higher than the $72.48 per barrel level at the end of February when the U.S. and Israel carried out strikes on Iran.
If the first scenario plays out, oil prices are likely to fall rapidly from current levels.
It is expected that OPEC+ members will be able to ramp up production quickly and bring extra barrels to the market while other producers are also trying to maximize exports.
It is also likely that a full peace agreement would allow Iran to freely sell its oil, while Russian supplies would remain partially or fully under Western sanctions.
If the second scenario prevails, the decision to raise output will be almost irrelevant.
The key will be how much actual oil passes through the Strait of Hormuz and how effective export routes via the Red Sea and through the United Arab Emirates from the Gulf of Oman will be at offsetting the reductions through Hormuz.
In this scenario, oil prices would remain volatile and sensitive to headlines in the media and public statements.
The third scenario – the one markets want to avoid – would entail prolonged and significant damage to energy infrastructure in the Middle East and global economic pain from losses of up to 20% of world crude oil and LNG supplies.
Under such development, the world economy would face substantial pressure as export earnings fall and energy-market volatility rises.
