Nationwide protests across Iran are intensifying concerns about the country’s economic stability, highlighting vulnerabilities in its oil revenue system and long-standing dependence on sanctions-resistant trade models.
Although Iran has managed to restore oil output and exports in recent years, the sustainability of this recovery is being tested by deepening domestic unrest, financial strain, and the escalating costs of circumventing international restrictions.
Despite U.S. sanctions, Iranian crude production is expected to remain steady at around 3.2 million barrels per day in 2026, according to industry analysis by Rystad Energy.
The immediate risk to output is limited, but the political and economic pressures surrounding the sector are growing.
Mounting protests have revealed cracks in a regime increasingly reliant on shadow trade networks, discount pricing to China, and depleted sovereign reserves to keep its oil economy afloat.
The greater threat to market stability lies not in supply disruption but in the rising geopolitical risk premium as tensions with the West intensify.
Iran’s economic policy continues to reflect the strain of heavy sanctions and restricted access to foreign capital.
Inflation has reached about 40 per cent, while the national budget increased only modestly from US$98 billion to US$111 billion over the past year.
The National Iranian Oil Company (NIOC), responsible for developing the nation’s oil and gas fields, officially receives 14.5 per cent of total export revenues.
However, roughly one-third of oil export earnings are transferred to the Islamic Revolutionary Guard Corps, leaving NIOC with an effective share of about 10 per cent, which is insufficient to meet operational costs.
This funding shortfall coincides with shrinking export expectations.
The government’s budget assumptions for oil sales have fallen from 1.85 million barrels per day to around 1 million barrels per day, while the assumed oil price benchmark has dropped from US$63 to US$57 per barrel.
Simultaneously, Iran’s core producing fields are aging rapidly, with natural decline rates accelerating due to chronic underinvestment in maintenance and redevelopment.
Limited access to international technology providers further constrains the ability to offset production losses in mature reservoirs or optimise recovery rates from complex gas fields.
The government has increasingly turned to the National Development Fund (NDF) to bridge fiscal shortfalls.
Although the NDF is legally entitled to 48 per cent of oil and gas revenues, official reports indicate that the fund has been heavily drawn down, with as much as 82 per cent of its resources spent by 2024.
Parliamentary reviews suggest that no oil revenues have been deposited into the fund since early 2023, while nearly 30 per cent of remaining assets are being loaned back to the state to cover immediate financing needs.
China now accounts for roughly 90 per cent of Iran’s crude exports, serving as the linchpin of its sanctions-era export model.
However, maintaining this trade comes at a steep cost.
Discounts offered to Chinese refiners, combined with high expenses tied to Iran’s “shadow fleet” of sanctioned tankers, ship-to-ship transfers, and indirect payment systems, have eroded the country’s realised revenues.
These workarounds result in Iran capturing only about two-thirds of prevailing market prices, even before accounting for insurance premiums, intermediary fees, and logistical inefficiencies.
Although the Iranian oil sector remains resilient in terms of physical output, its financial returns are increasingly constrained by the mechanics of sanctions evasion and declining fiscal buffers.
With unrest spreading nationwide and geopolitical uncertainty deepening, Iran’s ability to sustain its unconventional export model (and the regime’s broader economic stability) appears increasingly precarious.
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