The Oil Cartel That Moves Markets: Why OPEC Still Matters - Part 2

If you haven't read yesterday's blog post yet, please read it before continuing here.

OPEC+ and the Modern Power Structure

OPEC's grip on oil markets loosened in the 2010s as the U.S. shale revolution flooded the market with new supply. American producers, operating outside OPEC's control, became the world's largest oil producers. OPEC needed a new strategy. Enter Russia. In 2016, OPEC formalized an alliance with Russia and nine other non-OPEC producers to create OPEC+. The expanded group controls roughly 40% of global oil production. The Riyadh-Moscow axis became the new center of gravity in energy geopolitics.

The alliance has been tested repeatedly. During COVID-19, a brief price war between Saudi Arabia and Russia cratered oil prices below zero for the first time in history. They eventually reconciled and implemented historic production cuts. By 2025, Saudi Arabia had shifted strategy again, rapidly restarting production to reclaim market share ceded to U.S. shale, even as analysts warned of oversupply. OPEC+ has also become more politically complex. With Russia under Western sanctions and Iran as both an OPEC member and a military target, the organization now sits at the intersection of energy policy, great power competition, and armed conflict.

The Strait of Hormuz: OPEC's Achilles' Heel

For decades, Iran has threatened to close the Strait of Hormuz. It never followed through. Until now. On February 28, 2026, the United States and Israel launched coordinated airstrikes on Iran under Operation Epic Fury, targeting military facilities, nuclear sites, and the country's leadership. Iran's Supreme Leader was killed. Iran retaliated with missile strikes on U.S. and Israeli targets across the region, and on March 2, the Islamic Revolutionary Guard Corps (IRGC) officially declared the Strait of Hormuz closed.

The impact was immediate. Roughly 20 million barrels of oil per day normally transit through the Strait. That flow dropped to nearly zero overnight. Brent crude surged from around $73 per barrel to over $126 at its peak. It was the fastest and largest disruption to energy supply in modern history. OPEC+ scrambled to respond, agreeing to boost output by 206,000 barrels per day. But as analysts quickly pointed out, it was a signal, not a solution. The spare production capacity in OPEC+ is concentrated almost entirely in Saudi Arabia and the UAE, both of which sit on the Persian Gulf side of the Strait. You can't export oil you can't ship.

Iraq's southern oil production collapsed by 70%, falling from 4.3 million barrels per day to 1.3 million. Kuwait announced precautionary production cuts. The UAE began managing offshore production levels to deal with storage constraints. Even Saudi Arabia's east-west pipeline to the Red Sea could only move a fraction of its normal output through alternative routes.

This crisis exposed a brutal truth about OPEC's power: it only works if the oil can get to market. The Strait of Hormuz is OPEC's jugular vein. When it's cut, production quotas, spare capacity, and emergency agreements become largely irrelevant.

What This Means for You

While OPEC decisions might seem like abstract geopolitics, they're not. They hit your wallet directly. Since the Strait of Hormuz shut down, U.S. diesel prices have risen roughly 25%. California gasoline crossed $5 per gallon. Across Europe, diesel has exceeded two euros per liter in Germany, Finland, France, Italy, and the Netherlands. Spain saw a 27% increase at the pump.

But it goes beyond fuel. When oil prices spike, shipping costs follow. That feeds into the price of food, consumer goods, and raw materials. The Philippines saw its currency crash as its oil supply was among the hardest hit in Asia. Countries across Central Asia, dependent on Iranian ports for trade access, watched their routes to global markets disappear overnight. Even the IEA's coordinated release of 400 million barrels from strategic stockpiles, the largest in history, only buys roughly 20 days of cover for a full Strait closure. And accessing and distributing those barrels takes time. Shutting down and restarting production infrastructure isn't like flipping a switch.

OPEC's production decisions and the geopolitical conflicts that surround its members are not someone else's problem. They are built into the price of almost everything you buy.

Conclusion

OPEC was founded because a few nations got tired of Western oil companies setting the price of their most valuable resource. Now, more than six decades later, that power struggle hasn't ended. It has just gotten more complicated and more volatile. The organization that was born as a defensive alliance against the Seven Sisters has become a geopolitical force capable of moving markets, reshaping alliances, and sending ripples through the global economy in a matter of hours. The current crisis in the Strait of Hormuz proves the point. When OPEC's oil can't flow, the entire world feels it.

Whether you see OPEC as a necessary stabilizer or an exploitative cartel depends largely on where you sit. But one thing is not debatable: OPEC still matters. And as long as the world runs on oil, it will continue to do so.