BAKU, Azerbaijan, April 15. The increase in
geopolitical tensions in the Middle East has recently become one of
the main topics of discussion in the global energy market. In
particular, the escalation of the U.S.-Iran conflict and the risks
arising around the Strait of Hormuz have led to serious price
increases in the oil market. As a result of this process, Brent oil
has exceeded $100 at times, and even the possibility of an increase
to the $150-200 range in analytical scenarios has been discussed.
Consequently, a sharp increase was observed in the price of Azeri
Light oil, the main export product for Azerbaijan, and prices have
increased by more than 50 percent in a short time. Currently, the
price of Azerbaijani oil has exceeded $118. Thus, the CIF price of
Azeri Light Azerbaijani oil in the Italian port of Augusta was
$118.56. The average price of a barrel of oil in the 2026 state
budget of Azerbaijan is estimated at $65. As can be seen, the sharp
increase in oil prices currently observed creates a significant
difference between the base price envisaged in the state budget and
the actual market price.
Commenting on the issue, economists believe that
although this difference has a positive impact on the country's
export revenues and foreign exchange earnings in the short term,
its direct and automatic transfer to the state budget is not
mechanical because budget revenues are formed not only depending on
the selling price of oil, but also on production volumes, contract
terms, operating costs and tax mechanisms.
Economist Eldeniz Amirov told Trend that the rise in oil prices creates
different economic impacts in the short and long term. According to
him, although this increase in the short term increases
Azerbaijan's export revenues and budget revenues, in the long term
it accelerates inflation in import-dependent economies, which
negatively affects the purchasing power of the population.
"In the general context, every $10 increase in oil prices leads
to an additional inflow of approximately 400 million manat ($235
million) to the state budget. Last year, Azerbaijan exported an
average of 23 million tons of oil, which means 169 million barrels,
and based on this indicator, every $10 increase increases export
revenues by approximately $1.7 billion," he said.
Amirov added that if oil is sold $40 more than planned, this
will mean an additional revenue of about $7 billion.
"This, of course, serves to increase the country's foreign
exchange reserves. The State Oil Fund currently has foreign
exchange reserves of $74.5 billion, while the Central Bank's
foreign exchange reserves are $11.6 billion. When we add these up,
we can say that the country's strategic foreign exchange reserves
are $85.1 billion," he said.
The economist believes that the increase in oil prices may
create conditions for further growth in Azerbaijan's foreign
exchange reserves towards the end of the year. At the same time, he
emphasized that price increases also affect the inflation process.
According to him, this effect goes beyond Azerbaijan.
"Every 10% increase in oil prices in the world negatively
impacts inflation indicators by 0.5 percentage points," he
clarified.
According to preliminary estimates, oil revenues
increased by about 20% in the first quarter of 2026, and this
growth means an additional revenue of 360 million manat ($211.7
million) in total. This shows that despite the sharp increase in
prices, the fiscal impact remains relatively limited. The main role
in managing these revenues is played by the State Oil Fund of
Azerbaijan. Most of the additional revenues generated when oil
prices increase are not directly directed to the budget, but are
accumulated in the fund and stored as reserves for future periods.
This mechanism allows to maintain stable state spending and
protecting the economy from sharp changes in oil
prices.
Meanwhile, economist Ilham Shaban told Trend that there is no
doubt that transfers and payments to the budget will climb amid the
price increase.
Shaban noted that the process of oil production decline in
Azerbaijan continues.
"Even if the price increase compensates for this decline to some
extent under the current circumstances, it can be considered a
positive factor for Azerbaijan - a certain dividend," he
explained.
According to him, the main beneficiaries are transport and
logistics companies, as well as insurance and credit organizations.
The economist recommended not to exaggerate the impact of the
increase in oil prices on the income of producing companies.
"It cannot be said unequivocally that the rise in oil prices
will lead to a growth in taxes from the oil sector to the state
budget in the same proportion, for example, a doubling. More
precisely, amid the price increase, transfers and payments to the
budget will undoubtedly increase, but the specific volume of this
increase will be possible to determine only after the publication
of statistical indicators for the first quarter because the fact
that companies sell oil at a higher price doesn't mean that the
taxes they pay to the budget will also rise in the same
proportion," he said.
Shaban noted that, on the other hand, the level of companies'
expenses in the first quarter is also not yet known, and this
factor directly affects the volume of payments on profit tax.
Assessments of international organizations also show
that Azerbaijan is among the countries that are positively affected
by this process. According to the European Bank for Reconstruction
and Development (EBRD), as a result of rising energy prices, energy
trade surpluses in exporting countries such as Azerbaijan could
increase to 11–39% of GDP. This would significantly increase the
country’s foreign exchange earnings.
The International Monetary Fund (IMF) also takes a similar
approach, stating that while geopolitical risks may generate
short-term revenue growth for energy exporter countries, they could
also strengthen the overall macroeconomic balance. In this context,
Azerbaijan is considered one of the countries with an improving
external balance and increasing fiscal sustainability.
The International Energy Agency (IEA) presents two main
scenarios for the oil market. According to the average scenario,
the market gradually shifts to surplus from the second half of 2026
and prices stabilize. In a more pessimistic scenario, oil prices
could rise to the $150–200 range as a result of long-term supply
disruptions. While this increases Azerbaijan’s revenue
opportunities, it also increases the risk of high volatility.
According to Fitch Ratings, the increase in tensions in the
Middle East, even if short-term, could lead to a strengthening of
the fiscal position and an increase in foreign exchange reserves
for energy exporters. This factor is also considered a positive
signal in terms of Azerbaijan's credit risk profile.
On the other hand, analysts at ING Group note that although the
growth in energy prices creates inflationary pressures, the
increase in export revenues and foreign exchange inflows partially
compensates for this pressure. Inflation in Azerbaijan remains
mainly in the range of 5-6%, and maintaining stable domestic energy
prices helps to maintain this stability.
Overall, although geopolitical tensions in the Middle East are a
global risk element for Azerbaijan, they are becoming a process
that creates more economic opportunities. A growth in oil prices of
about 50%, a rise in export revenues, strengthening foreign
exchange inflows, and an increase in fiscal reserves strengthen the
country's macroeconomic stability. The main decisive factor is how
these additional revenues are managed, since long-term stability
depends on the efficient allocation of these resources.
