Iran’s oil production has reached record levels in recent months, despite facing significant challenges, including U.S. sanctions and military actions by Israel. The country has successfully established strong partnerships with China and several other nations to navigate these restrictions, allowing it to maintain crude exports. This trend is expected to persist into 2026, although recent U.S. military interventions in Venezuela may complicate the situation.
The U.S. has imposed sanctions on Iran’s energy sector since 2018, during President Donald Trump‘s first term in office. Following his re-election in January last year, Trump has enacted additional sanctions targeting Iranian oil exports. Despite these pressures, Iran remains a substantial oil producer, holding the world’s fourth-largest proven oil reserves, accounting for approximately 9% of the global total.
Historically, Iran’s oil production peaked at over 6 million barrels per day (bpd) in 1974. However, ongoing conflicts and sanctions have drastically reduced production capabilities. Estimates suggest that Iran’s output has gradually increased from around 2.9 million bpd in 2019 to between 3.2 million and 4 million bpd in 2024. This recovery has been supported by a combination of lax U.S. enforcement of sanctions and Iran’s persistent efforts to circumvent these restrictions.
China has emerged as Iran’s primary trade partner, purchasing around 90% of Iran’s exported oil. In the first half of 2025, Iranian crude accounted for approximately 13.6% of China’s oil imports. Chinese independent refiners, often referred to as “teapots,” have become the main buyers of Iranian oil, while state-owned companies tend to avoid Iranian crude due to sanctions. These independent refiners have been particularly active in acquiring Iranian oil at discounted rates, which can be as much as $7 to $8 per barrel below global benchmarks.
In December, reports indicated that these refiners increased their purchases of Iranian oil stored in bonded facilities and on idle tankers, following the introduction of new import quotas. Despite the uptick in sales, Iran’s economy remains under pressure. A former senior Iranian oil official noted, “Even if export volumes increase, the key problem is the repatriation of revenues, which faces numerous obstacles.” The Iranian currency has suffered significant devaluation, and the nation recorded an inflation rate of 42.2% in December. Rising gasoline prices, spurred by unsustainable subsidies, have led to widespread protests throughout the country.
On January 3, 2024, the U.S. conducted a military intervention in Venezuela, capturing President Nicolas Maduro and his wife. This event has raised concerns about potential U.S. actions in Iran, as geopolitical tensions continue to mount. Trump has hinted that military action could extend to Colombia and Mexico, further complicating the regional landscape. Iranian officials have warned that any U.S. intervention in domestic protests could lead to targeting of American troops.
Venezuela, like Iran, is a significant oil producer under U.S. sanctions. Both nations have managed to evade these restrictions in recent years, facilitating oil trade between them. The recent U.S. actions in Venezuela may prompt shifts in oil trade dynamics in 2026, potentially influencing Chinese refiners to reduce their reliance on Iranian crude. While the future remains uncertain, the interplay of sanctions, military actions, and geopolitical relationships will undoubtedly shape Iran’s oil industry landscape in the coming years.
