The United Arab Emirates’ sudden departure from OPEC after six decades is set to weaken the oil cartel, potentially sparking a price war with Saudi Arabia that could roil global markets for years. The move, announced on Tuesday, comes amid ongoing conflict in the Middle East and has already contributed to oil prices hitting a four-year high above $126 a barrel.
Analysts warn that a post-war standoff between the two Gulf heavyweights could lead to a race to maximize exports, with Saudi Arabia likely to aggressively market its oil to Asian buyers by offering discounts. The UAE, OPEC’s third-largest producer, could ramp up output from below 3 million barrels per day to between 4.5 million and 6 million barrels once the Strait of Hormuz reopens.
Both nations have low production costs and a fiscal need to generate revenue for transitioning to a low-carbon economy. Experts compare the potential conflict to the oil market crashes of the 1980s and 2014, which caused widespread job losses and political instability.
The surge in prices due to the Iran conflict is also expected to boost competitors like the US, Brazil, and Guyana, while economies accelerate plans to reduce fossil fuel reliance. A post-war market defined by new supplies and uncertain demand would likely see Gulf states pumping at maximum capacity, leading to lower long-term prices—a direct challenge to OPEC’s traditional role of stabilizing markets.
