The renewed US-Iran tensions have brought geopolitical risks back to the forefront. At the time of writing, no actual military operations have begun. While Europe has given the US a green light with its message, it's clear that Iran represents much more than just its geographical location. The world has 1.77 trillion barrels of oil reserves. According to OPEC data, Iran ranks third in the world with 209 billion barrels of proven oil reserves. Venezuela is first with 303 billion barrels, followed by Saudi Arabia with 267 billion barrels. Russia's 80 billion barrels, China's 28 billion barrels, and the US's 35 billion barrels place these countries lower in the rankings.
However, the oil production volumes of countries indicate a different ranking. Worldwide oil production is approximately 73 million barrels per day. The US accounts for 22% of total production. 36% of total daily production takes place in OPEC countries and 31% in the Middle East. Latin America's share of daily production is 10%, Russia's 13%, and China's 5%. Iran, with a daily production of approximately 4 million barrels, produces less than 1% of its own reserves and lags behind in the world rankings.
These statistics highlight Iran's strategic importance in terms of proven oil reserves, despite its lower production volume. They also underscore the power of both OPEC and OPEC+ and the dominance of the Middle East in the oil market. The influence of Saudi Arabia within OPEC and Russia within OPEC+ is also reflected in the figures. While reports indicate that the world's oil reserves have approximately 50 years of lifespan remaining, countries with high reserves stand out positively.
Oil is, as we know, a limited resource. According to the latest figures, global demand for oil is approximately 103 million barrels per day. The reserves/production ratio, which indicates how many years of oil reserves remain in the world, reflects in global reports that, according to 2024 data, the world's oil reserves will be depleted in approximately 50 years. However, countries with high proven oil reserves and low production hold significant potential. According to this method, the US is estimated to have approximately 11 years of oil reserves remaining, while this figure is calculated to be 58 years for Russia and over 200 years for the Middle East region, including Iran. This more clearly explains the geopolitical tensions of the past few weeks.
There is another indicator as important as price movements in measuring the impact of geopolitical risks on oil prices. The CBOE Crude Oil Volatility Index (OVX) is considered a fear index in the oil markets. OVX is an index derived from crude oil options that measures expected volatility over the next 30 days. Just as the VIX fear index is for stocks, OVX is interpreted similarly for the oil market. OVX, which remained relatively stable in the 30-35 range in December, has risen to the 45-50 range in January, reflecting a higher risk expectation. Interestingly, this increase has occurred faster than oil prices.
In other words, while the market hasn't yet seen a sharp price jump, it underscores the possibility of a shock. The tension with Iran plays a role, but the geopolitical risk posed by the Strait of Hormuz is perceived as a more prominent factor. If the US-Iran tension extends beyond Iran and spreads into the Middle East, becoming a regional risk, the strong uncertainty highlighted by OVX will inevitably be reflected in oil prices in the very short term. Iran's wealth isn't limited to oil. When we combine its underground natural gas reserves with lithium, considered the "white gold" of the technology world, and rare earth elements, the backbone of its defense industry, Iran's importance becomes much clearer. This underscores the fact that appetite for Iran will be a significant risk factor.
