The large-scale military operation by the United States and Israel against the Iranian regime has triggered sharp volatility in global energy markets. Rising geopolitical risks in the Strait of Hormuz — a critical artery for the world’s hydrocarbon transit — have pushed oil prices close to the 100-dollar-per-barrel mark. Analysts do not rule out that prices could soon break the psychological threshold of 120 dollars.
The escalation in the region has fundamentally altered market expectations. As recently as the end of last year, amid forecasts of a supply surplus in 2026, oil prices were holding below 60 dollars per barrel. The situation changed in January following the harsh suppression of protests in Iran and the subsequent concentration of United States forces in the region.
Tehran’s threats to paralyze shipping in the strait and Washington’s promises to guarantee freedom of navigation have created a situation of high uncertainty. This environment benefits energy-exporting countries that remain outside the zone of direct confrontation, including Azerbaijan.
ING Assessment: Budget Surplus and Manat Stability
According to an analytical report by the Dutch banking group ING Group, sustained oil prices exceeding baseline forecasts by even 10 dollars could bring Baku roughly 3 billion dollars in additional export revenues per year.
Dmitry Dolgin, chief economist at ING for Russia and the CIS, notes that this would translate into approximately 1.5 billion dollars in additional state budget revenues, equivalent to about 2 percent and 4 percent of GDP respectively.
“This trend effectively offsets the risks of a foreign trade deficit in 2026 and serves as a powerful factor supporting the stability of the national currency — the manat,” Dolgin emphasizes.
Imported Inflation
Despite the increase in foreign currency revenues, experts warn about potential side effects. Due to technical limitations on increasing physical production volumes, the impact of higher oil prices on Azerbaijan’s overall GDP growth will likely remain moderate.
Moreover, ING forecasts an acceleration of imported inflation. Approximately half of Azerbaijan’s imports come from developed economies and regions neighboring the conflict zone, whose economies are experiencing pressure from expensive fuel. As a result, average inflation in Azerbaijan in 2026 is expected to reach 5.4 percent.
Azerbaijan’s state budget for 2026 is based on a conservative oil price assumption of 65 dollars per barrel. With Azeri Light currently trading around 100 dollars, this creates a substantial financial safety buffer.
Azerbaijan GDP Growth Forecast (ING)
2026: 2.5 percent (a slight downward revision due to inflation risks)
2027: 3.0 percent (forecast raised by 1 percentage point amid expected stabilization)
For comparison, the country’s economy grew by 1.4 percent in 2025 with inflation at 5.6 percent. Under the conditions of the current crisis, Azerbaijan is effectively becoming one of the key beneficiaries of the redistribution of global energy flows, strengthening its position as a reliable supplier amid the turbulence in the Persian Gulf.
Elyas Shafiyev
