Iran's Real Oil Risk Is Labor Strikes, Not Bombs

For decades, Iran has been the nexus of global geopolitical risk. Its potential to create chokepoints in the flow of oil is ingrained in the minds of traders, with the Strait of Hormuz posing the biggest risk. But for all the recent focus — and hype — on the possibility of military conflict, the largest danger is far more mundane: A labor market strike by the nation’s oil industry employees. The distinction is important because while the risk of a US attack has receded, the potential for labor unrest has paradoxically increased. The former scares the market but rarely impacts on supply; the latter is overlooked — but historically has triggered large production outages.

Is Iran’s oil industry about to be shut down by protesting employees? Probably not. Resorting to brutal repression, Tehran last week contained the latest wave of protests. The death toll probably runs into several thousands, perhaps the worst state violence in the regime’s 47-year history, surpassing the killings and mass executions of 1988, 1999, 2011 and 2022. For now, the Islamic Republic has regained control of its major cities.