US-Iran war: Amid disruptions to the Strait of Hormuz route and a deadlock in US-Iran ceasefire talks, the UAE announced a surprise exit from the oil cartel OPEC on 1st May 2026. Even though the UAE’s departure from OPEC won’t have an immediate impact on crude oil prices, supply chain logistics have already created a demand-supply constraint. However, experts believe that in the long term, the UAE’s exit from OPEC would allow it to produce oil in line with its potential, helping curb OPEC’s dictate to lower production and raise crude oil prices.
UAE leaves OPEC: Was it a surprise?
On whether the UAE surprised the global observers by announcing to leave the oil cartel, Abhinav Tiwari, Research Analyst at Bonanza, said, “The UAE’s decision to leave OPEC is not a sudden move but a well-planned strategic shift driven by economic and geopolitical factors. The key issue was the gap between its production capacity and OPEC quotas. While the UAE has built a capacity of around 4.8 million barrels per day, it was allowed to produce only about 3.2 million bpd under OPEC rules. This limited its ability to fully utilise investments, especially as it targets 5 million bpd by 2027.”
Pointing to the strategic shift in the UAE’s policy, Abhinav Tiwari of Bonanza said that, instead of supporting higher oil prices through production cuts, as preferred by Saudi Arabia, it is now focusing on producing and selling more oil before global demand slows due to the energy transition.
Dhaval Popat, Analyst — Energy at Choice Institutional Equities, said, “The UAE’s exit from OPEC marks the culmination of a long-building strategic divergence, now crystallising in a far more complex geopolitical and market backdrop. The transformation of state-owned Abu Dhabi National Oil Company from a legacy upstream operator into a capital-efficient, growth-oriented energy platform underscores a strategic pivot toward monetising reserves ahead of structural demand erosion.”
The Choice International Equities expert said that the core friction with OPEC stems from a misalignment between the UAE’s capacity-expansion ambitions and the cartel’s quota-driven supply discipline. While earlier quota disputes – particularly in 2021 – were temporarily resolved through baseline adjustments, they failed to address the underlying structural mismatch.
“Escalating regional tensions have further elevated the decision from a purely economic consideration to a broader strategic realignment of alliances and institutional commitments. In this framework, OPEC membership is no longer viewed as sacrosanct, but rather as a conditional arrangement subject to national interest optimisation,” said Dhaval Popat.
UAE has an alternative to the Strait of Hormuz
Pointing towards the alternative route that the UAE can use to bypass the Strait of Hormuz deadlock, Abhinav Tiwari of Bonanza said, “Geopolitical tensions, especially with Iran and risks around the Strait of Hormuz, also made staying in a coordinated cartel less attractive. A key advantage for the UAE is the Abu Dhabi Crude Oil Pipeline, which can transport about 1.5 million bpd directly to Fujairah, bypassing Hormuz. Since Fujairah opens into the Arabian Sea, oil can be shipped safely and quickly.”
Dhaval Popat of Choice International Equities believes that for OPEC+, the more critical risk now is not immediate supply loss, but the precedent this exit sets – testing the cohesion of an alliance already balancing divergent producer incentives.
“UAE’s exit could intensify supply-side flexibility, exerting downward pressure on global oil prices, thereby easing India’s import bill and structurally compressing the current account deficit through improved trade balances,” Popat said.
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