Simulations of US-Iran War and Its Impact on Global Oil Price Behavior

Abstract

We perform simulations to assess the impact of a war between the US and Iran on global oil price behavior. To do so, we evaluate different levels of war intensity and oil price behavior from a multidimensional perspective. In this context, we simulate various scenarios using a simulator which is based on a complex algorithm and multidimensional coordinate spaces. This new simulator is the “War Oil Crisis Simulator (WOC-Simulator)". The WOC-Simulator provides policymakers and researchers with a new, simple analytical tool to study the impact of war on oil prices. We apply the simulator to different war scenarios between the US and Iran between 1980 and 2025. The two countries have been geopolitical adversaries since 1979, when an Islamic revolution toppled a pro-Western monarchy. The US remains the world’s only global superpower and Iran is a major oil exporter with significant regional geopolitical influence. Persistent conflict between the two countries in the Middle East, a vital oil-producing region, may disrupt smooth flow of global oil supplies and thus destabilize global oil prices.

Keywords: War, oil, oil price, US, Iran, economic modeling, economic desgrowth

JEL Classification: R11, R12