Opportunities and dangers: Opposition to Iran war set to grow in Latin America when prices increase

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NEW YORK/BOGOTA – Mr Hector Luis Peci, a taxi driver in Argentina’s capital Buenos Aires, and millions of other Latin Americans are beginning to feel the blowback from the Middle East energy crisis, stemming from a blockade of the Strait of Hormuz some 13,000km away.

Brent crude oil has surged nearly 50 per cent since the start of the war, reaching US$114.81 per barrel as of March 27.

“It’s a huge amount,” said Mr Peci of the spike in gas prices. To cushion the impact, he now accepts only short trips. “Although it’s not ideal for me economically, at least I know that it won’t cost as much to refill my tank.”

“It’s difficult because (Uber) used to pay more per kilometre and now, on top of that, the costs have risen – it’s like a bottleneck,” said Mr Peci, describing how the pressure comes from both sides.

If prices continue to rise, he lamented, “I will have to quit (driving).”

With Iran retaliating by not only closing the strait but also striking refineries and oil fields in the Gulf countries, the effects of the conflict have a truly global reach, including in Latin America.

While Iran has allowed ships from select nations to transit in exchange for substantial fees, the waterway remains effectively closed to most shipping.

On March 26, US President Donald Trump extended his deadline for Iran to reopen the strait to April 6, but Tehran has denied that any negotiations are taking place.

Not only do some 20 per cent of the world’s oil and liquefied natural gas (LNG) pass through the Strait of Hormuz, but so do raw materials for fertilisers and crop seeds, which could adversely impact producing countries in the region.

Oil importers to be hit hard

Rising oil prices will have a near-universal inflationary effect across the Americas.

Argentina has hit record shale oil production in 2026, driven by President Javier Milei’s push to develop Vaca Muerta – a massive unconventional formation in Patagonia that has made Argentina a growing oil exporter.

Mr Milei has touted the country’s position as a secure energy supplier, predicting a “rain of dollars”. But for workers like Mr Peci, the benefits are far from evenly distributed. Rising fuel prices are already pressing consumers in a country with a history of rampant inflation.

Argentina’s agricultural sector, its largest source of export revenue, also faces a squeeze. The country imported more than 65 per cent of its fertiliser in 2024, according to the Rosario Stock Exchange, leaving it heavily exposed to the global surge in urea prices.

Other countries in Latin America that depend on oil imports are also in dire straits. Chile, one of the region’s most notable importers of both crude and oil products, is particularly vulnerable.

An Oxford Economics report published in March found that the South American nation would be one of the most damaged economies by an oil shock, alongside Central and Eastern Europe and India. 

Chile is not a domestic oil producer and imports roughly 95 per cent of its oil consumption and 85 per cent of its natural gas needs from the United States, Brazil, Ecuador and others. With virtually no domestic production to offset rising prices with export revenues, Chile will absorb the full force of price increases. 

However, unlike many Caribbean nations, Chile does not rely on fossil fuels for electricity. Renewables accounted for 70 per cent of its grid in 2024. Instead, its vulnerability lies in transport and industry, which remain dependent on imported petroleum.

Market damage is already visible: Chile’s stock market has fallen by over 10 per cent, and its currency has depreciated by around 5 per cent since the first strikes on Iran.

While Chile has a fuel stabilisation fund to reduce price volatility, banks like JPMorgan have already raised their inflation forecasts in the country from 3.4 per cent to 3.6 per cent for 2026 with “risks tilted to the upside”.

Even more exposed to oil shocks are Caribbean and Central American nations, say analysts.

These small nations import the majority of their consumable goods, making them particularly sensitive to fluctuations in fuel prices.

“Some of them use oil products not only for transportation, but also for power generation... So they have a sort of double whammy on that price pressure,” said Mr Diego Rivera Rivota, a research associate at the Center on Global Energy Policy at Columbia University.

Caribbean states use imported fossil fuel for over 90 per cent of power generation, according to the World Bank, making them especially vulnerable to price shifts. 

Caribbean nations are also largely dependent on tourism, which may take a hit as soaring fuel costs force airlines and cruise operators to raise prices.

The UN World Food Programme warned on March 17 that an additional 2.2 million people in Latin America and the Caribbean could face acute food insecurity if the crisis persists, driven by rising fuel and food import costs in the region’s most vulnerable economies.

Oil producers like Brazil and Guyana could benefit

On the flipside, the crisis could present opportunities for major oil producers in Latin America such as Brazil, Mexico and Venezuela, even as it threatens to unleash inflation and deal a blow to ordinary people, say analysts.

Brazil is Latin America’s top oil exporter, followed by Mexico and Guyana, which collectively ship around 3.5 million to four million barrels per day to global markets, representing about 7 per cent to 8 per cent of global seaborne crude trade. While modest compared with the 15 million to 20 million barrels per day passing through the Strait of Hormuz, the region’s contribution is fast growing, with Brazil, Guyana, and Argentina accounting for 28 per cent of all global crude production growth in 2025.

Notably, with over 80 per cent of crude oil and LNG passing through the Strait of Hormuz headed to Asian markets, Asian importers are scrambling for replacements.

Currently, China, India, and Japan account for the top three Asian buyers of Latin American oil.

“About 30 per cent of South America’s oil exports already flow to China, with another 5 per cent to India and 1 per cent to Japan,” said Mr Rivota.

Just days after the US and Israel bombed Tehran, Mr Cristiano Pinto da Costa, president of Shell Brazil, called the conflict an “enormous opportunity” for the largest foreign oil and gas producer in Brazil. The country, he argued, offers geopolitical stability, making it a reliable oil producer compared with Middle Eastern nations and neighbours like Venezuela.

Mr Frank-Jurgen Richter, chairman of Horasis, a think-tank based in Zurich which holds economic summits in Brazil, said: “Brazil’s strong trade relationships with Asian countries, particularly China, mean the country is already set up to export its oil to these nations, which are searching for alternatives amid the Middle East crisis.”

But while Brazil may benefit from boosting its exports to Asia, its economy is also vulnerable to fuel price shocks.

Regional expert Oliver Stuenkel, a fellow at the Harvard Belfer Center for Science and International Affairs, explained: “It’s a highly diversified economy where inflation is bound to rise because Brazil is very dependent on trucks carrying stuff. The sense I’m getting from Brasilia is that this is actually a challenge.” With food, consumer goods and raw materials transported mainly by trucks, rising fuel prices mean consumers will take the price hit.

Professor Stuenkel called the situation a “mixed bag”, at best, and a “headache”, at worst, for Brazilian President Luiz Inacio Lula da Silva, whose bid for re-election in October could be upset by an inflationary scenario.

Prof Stuenkel suggested Guyana may be poised to benefit most from the crisis in the Middle East: “Perhaps only Guyana would be, sort of, a flat-out winner.”

In contrast to the situation in Brazil, the small but oil-rich nation on the Atlantic coast to the north of Brazil is eyeing a massive windfall, with petrol comprising two-thirds of its exports, according to Prof Stuenkel. 

Guyana, which became a major oil exporter only in 2015 when Exxon discovered major offshore oil reserves, has quickly become one of the world’s fastest-growing economies, shipping the lion’s share of its oil exports to Europe and the United States. 

With oil prices soaring, Guyana has given Exxon approval to increase oil production by 900,000 barrels per day.

Gulf exports not substitutable

But experts warn that Latin American oil producers may not be able to easily substitute suspended Gulf exports.

Mr Ben Cahill, Energy Security and Climate Change fellow at the Center for Strategic and International Studies, said: “Crude quality matters.” He explained that Asian refiners are accustomed to Gulf crude, which is light to medium sour (with higher sulphur content, requiring more complex refining), while Brazil and Guyana’s reserves are light to medium sweet (with lower sulphur content, easier to refine but not what Asian refineries are built to process).

“(These are) not the kinds of barrels that directly replace lost barrels from the Arab Gulf states.”

Moreover, overhauling logistics infrastructure for transportation and boosting production capacity are not things that can be easily and quickly achieved.

Ms Radhika Bansal, senior vice-president at Rystad Energy, a research and energy intelligence company, agreed that producers such as Brazil and Guyana cannot fully replace Gulf oil, but said the crisis underscores their growing strategic value.

“Latin America contributes to incremental rebalancing rather than full replacement... making it a key source of diversification,” she noted.

According to Mr Matt Smith, lead Americas oil analyst at Kpler, there has been no notable increase in oil flows from Latin America to Asia since the crisis began.

“It takes time, from buying the oil to sorting logistics to moving it – so we don’t expect to see a material change in flows until we move into April,” Mr Smith told The Straits Times.

Mounting opposition to Iran war

Latin American leaders have displayed a mixture of support and criticism, or have remained silent about the attacks in the Middle East.

Mr Adam Isacson, defence director at advocacy group Washington Office on Latin America, told The Straits Times: “The Iran attack (has) really brought into relief, in terms of diplomacy and politics, which leaders are most aligned to (US President) Trump, which are keeping their heads down, and which are outspoken.”

Right-wing Argentine President Milei is the only leader to have openly backed the US-Israel attack on Iran, while other allies of Mr Trump, such as El Salvador and Ecuador, have remained on the sidelines.

Meanwhile, Brazil and Mexico, the two left-leaning regional powerhouses, as well as Colombia, called for an immediate ceasefire in a statement earlier in March.

In Latin America, inflation and fuel prices have been key triggers for popular protest movements over the years.

Mr Isacson said political opposition to Washington’s war in Iran may grow if regular people start to suffer. “There’s certainly an electoral calculus to be had,” he noted.