UAE Quits Opec in Shock Move as Iran Conflict Disrupts Global Energy Markets

The United Arab Emirates has announced it is quitting the Opec group of oil producers in an unexpected move that could allow it – in theory – to produce more oil and gas.

The UAE is leaving Opec and Opec+ (which includes allies such as Russia) from 1 May, marking what analysts describe as a pivotal event for the global energy market.

However, the near-term implications of the move are likely to be relatively limited. Michael Brown, senior research strategist at brokerage Pepperstone, explains: "Though the UAE have pledged to 'gradually' increase production after their departure, it goes without saying that actually doing so at present is somewhere between difficult, and impossible. As the US-Iran conflict continues, and the Strait of Hormuz remains impassable, the most significant issue for the crude market is not production, but actually shipping product to where it is needed."

The UAE's energy ministry says in a statement that the decision "reflects the UAE's long-term strategic and economic vision and evolving energy profile", and follows a "comprehensive review" of its production policy, and its current and future capacity.

The UAE insists it has been a loyal member of Opec, saying: "During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all. However, the time has come to focus our efforts on what our national interest dictates and our commitment to our investors, customers, partners and global energy markets."

The UAE pledges to "act responsibly" after it quits Opec, saying it will bring "additional production to market in a gradual and measures manner" in line with demand and market conditions.

Brown adds that the UAE has clearly been dissatisfied with Opec for some time, believing that its quotas are an unfair limit, which constrain its major infrastructure investment projects.

The UAE's pre-conflict output target of 5 million barrels per day in 2027 could now prove more likely to be achieved, in turn helping crude benchmarks to normalise in shorter order once the ongoing Middle East conflict comes to an end.

The decision is a blow to Opec, but could potentially please the White House. Under normal times, Opec's production quotas restrict how much oil a member state can sell on the markets. Once the UAE has left, it will be free to pump more – which could push down prices.

Opec currently includes 12 members, including Iran, Iraq, Saudi Arabia and Kuwait. The current Middle East conflict has created tensions within the group. In March, Iran launched a successful drone attack on the UAE's Shah gas field, and also attacked the United Arab Emirates port of Fujairah – which lies just outside the strait of Hormuz, while its other export hubs are located within the Gulf.

Tensions have also been growing between the UAE and Saudi Arabia, which is the dominant player within Opec. The two countries have been supporting different groups in Yemen – culminating in Saudi Arabia bombing what it said was a shipment of weapons for Yemeni separatists that had arrived from the UAE in December.

Meanwhile, UK government borrowing costs are heading towards their highest levels since the financial crisis in 2008, as the Iran war drags on. The yield, or interest rate, on 10-year UK gilts has risen to 5.02%, up 5 basis points, approaching the 18-year high of 5.11% hit on 23 March.

Chancellor Rachel Reeves is pledging to stick with the current windfall tax on oil and gas companies in the UK. Asked about BP's surge in profits, at Treasury questions in Parliament today, Reeves says the Energy Profits Levy allows the government to tax some of the profits made by energy giants during the Iran war.

The chancellor tells MPs: "The oil and gas sector will play an important part in our energy mix for many years to come, and we need to support them, as we are for example through tiebacks. But it is important that the energy profits levy remains in place for now. During this conflict we will be able to capture the profits made in the UK through the windfall tax."

BP's profit surge in the first quarter of this year probably won't last, due to the disruption to energy infrastructure since the Iran war began, predicts Kathleen Brooks, research director at XTB. After BP reported results that "smashed expectations", Brooks says: "In fairness, an oil major that makes bags of money during an energy price shock should not be a surprise. Its share price was higher by 3%, after it reported profits of $3.8bn, driven by strong oil trading revenue. This is a good start for new CEO Meg O'Neil, but the question is, will it last? The answer is most likely no, as the company also noted flat production levels due to disruption at its sites in the Middle East."

US carmaker GM has lifted its profit forecasts, after Donald Trump's Supreme Court defeat over his sweeping tariffs. GM has lifted its guidance for adjusted EBIT this year, after "a favorable adjustment" of approximately $500m resulting from the ruling that tariffs claimed under the International Emergency Economic Powers Act were unlawful.

UK grocery inflation has slowed this month, new data shows, despite the disruption caused by the Iran war. Worldpanel by Numerator has reported that like-for-like grocery inflation fell to 3.8% in the four weeks to 19 April, which is the lowest rate in a year.

Fraser McKevitt, head of retail and consumer insight at Worldpanel by Numerator, explains: "Concerns about the impact of the Middle East conflict on prices of everyday goods are front of mind for British households. Already feeling the squeeze at the petrol pump, shoppers are responding by turning to special offers in growing numbers when buying groceries."