Inflation, more expensive gasoline and threats to the food supply in the most vulnerable countries. These are three of the main consequences that are often mentioned when talking about the economic impact of the United States and Israel’s war against Iran.
However, for Guyana – probably the world’s newest petrostate – the conflict that keeps the Strait of Hormuz blocked has meant more, much more income.
These resources come from the combination of two effects: the scheduled increase in production and the effect of the increase in the price of oil as a consequence of the war in the Middle East.
According to Sidney Armstrong, professor in the Department of Economics at the University of Guyana, by December 2025, his country’s crude oil production would be around 892,000 barrels per day, while currently it already exceeds 920,000 (and with a tendency to continue rising).
At the same time, while before the war the price of Brent crude oil reference was around US$62, the daily average since the start of the war is around US$108, according to data from the US government’s Energy Information Agency (EIA).
But what does this mean for Guyana and what impact does it have?
Accelerated growth
Guyana’s oil history is very recent. Its hydrocarbon production began just six years ago, but that short period has already been enough to make it one of the largest oil producers in South America.
“Guyana is an interesting case in that it has become the fastest growing economy in the world. To a large extent, this is because it starts from a really small bottom, but it is still the fastest growing economy,” says Roxanna Vigil, a researcher at the Council on Out of the country Family contributors, a Washington-based think tank.
Oil revenues have become the engine of the country, whose economy has grown at an average of 40.9% annually since 2020, according to World Bank figures.
In addition, income from the exploitation of hydrocarbons represented 37% of the State budget in 2025, the year in which the country earned approximately US$2.5 billion through this channel. Estimates from the Ministry of Finance – prior to the war in Iran – pointed to oil income for 2026 of around US$2.8 billion.
But the war in Iran and, especially, the closure of the Strait of Hormuz, have changed these calculations.
Figures published by The Economist indicate that since the start of the war, Guyana’s oil revenues increased by US$370 million weekly to US$623 million.
“Due to higher global oil prices, we expect government revenue to increase by $4 billion over the year, compared to estimates from early 2026,” said Luiz Hayum, senior exploration and production analyst at consultancy Wood Mackenzie, in response to a query from BBC Files World.
He added that they expect the average crude oil extraction in that country to be around one million barrels per day in 2026, after the expansion of production planned for this year.
However, Sidney Armstrong warns that most of the resources generated by oil exploitation in Guyana do not go to the country’s coffers, due to the way in which exploitation contracts are designed.
Thus, 75% of the money is used for oil companies to recover their investment. Guyana meanwhile receives 12.5% profit and an additional 2% for royalties, up to a total of 14.5%.
Once the oil companies have recovered their initial investment, Guyana will receive 50% of the profits plus 2% in royalties.
The good news for the Georgetown government is that, thanks to the increase in crude oil prices due to the situation in Iran, the time it will take for oil companies to recover their investment is shortening.
Natural Resources Fund
Armstrong warns, however, that if these companies have to make new investments, the current profit distribution formula would remain in place until they recover those funds.
Additionally, the government of Guyana does not freely dispose of the resources it receives since the country established a Natural Resources Fund in which money from oil is deposited and a law was approved that regulates when, how and for what purpose that money can be used.
According to this rule, the creation of this fund seeks to guarantee stable and controlled growth (avoiding excessive expenses in good times) and ensure that the money is allocated to the country’s development priorities, while conserving resources for the benefit of future generations.
As of March of this year, the fund had about US$3.8 billion.
But how has this oil bonanza due to the war in Iran translated into benefits for the Guyanese?
Sidney Armstrong points out that the impact of the oil price is noticeable in the increase in income, in the reserves of the Natural Resources Fund and in the acceleration of infrastructure projects underway in the country.
“What’s been happening at an increasing pace is the construction of infrastructure. Spending on building roads, schools and community health centers has increased,” Armstrong says.
Roxanna Vigil points out that this type of works is very important since Guyana needs many basic infrastructures like these.
“They need to continue growing a lot. Until recently, more than half of Guyana’s population lived in poverty and in fact, a large part of the population continues to live in poverty, but now they have a figure out and the resources to change that situation,” says Vigil.
On the other hand, Armstrong indicates that the government recently granted a bonus for an amount equivalent to US$500 to all Guyanese over 18 years of age.
He explains that this was a promise that the government had made last year, but had not honored until now.
The other side of bonanza
Despite the oil bonanza, Guyana does not escape the problems that the crisis in the Middle East has caused around the world.
“The reality is that inflation has increased and, consequently, real purchasing power has decreased,” says Armstrong.
“People are seeing higher prices at the pump, which – obviously – has an impact on transportation and travel. So, like any other country integrated into the global system, we are beginning to feel the negative repercussions derived from the situation in supply chains.”
“Food prices have increased significantly: around 25% in a short period. This is obviously due to the fact that elements such as fertilizers and other agricultural inputs are becoming more expensive. The resources necessary for agricultural activity are becoming more expensive, so these negative repercussions must be taken into account,” he adds.
The economist is also concerned that, in certain cases, there does not seem to be such a transparent and adequate management of the resources generated by the oil bonanza.
“What happens outside the oil sector depends largely on how effectively the government manages resources. And sometimes it feels like mismanagement is taking place. For example, there is a project to transport gasoline from offshore platforms to the mainland to transform it into electricity. We are talking about a project that will really generate great benefits. However – and this is where that feeling of corruption comes in – the project is delayed, on the one hand; and, on the other, the contractor is demanding hundreds of millions of additional dollars to be able to complete it,” he says.
Armstrong points out that there is an increase in inequality in the country and that the real wages of the majority of Guyanese have not seen significant changes.
“There are still many people without housing. It is a problem that persists, as does real poverty. Therefore, when talking about this fastest growing economy, it is significant to return to the reality that, in terms of what we could call human development, we still have a long way to go,” he concludes.
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