In January 2016 members of the Shia Muslim community protest outside Saudi Arabia's embassy in Greece after the majority Sunni country executed Shi'a Sheikh Nimr al-Nimr - Milos Bicanski / Stringer / Getty Images

November 16, 2017   4 mins

The oil-rich Middle East has a long history of tensions between Sunni and Shi’a Muslims, with Saudi Arabia and Iran facing-off through proxy wars. If the oil price crashes to anywhere close to $10 a barrel, these oil-revenue dependent nations will face devastating economic crisis. But what could the religious repercussions be? To understand that, we need to first understand the knife-edge on which the region’s religious tensions currently balance.

A look at the Shi’a-Sunni conflict within the Kingdom of Saudi Arabia

Saudi Arabia’s Sunni-Shi’a relations are a cycle of repression, rebellion and activism that dates back decades. The execution of Shi’a cleric and activist Sheikh Nimr al-Nimr, along with three other Shi’a clerics, in January 2016, was the latest chapter in the long-running and unequal struggle between the Sunni Saudi government and the Shi’a minority. In the 1980s there was armed confrontation, which was brutally put down, and after which many leading Shi’a clerics came to an accord with the Saudi government in 1993 – one Al-Nimr refused to join.

It’s an unhappy arrangement, with Shi’a resentment at their treatment never too far from the surface. And oil plays a key role in maintaining it.

The rising influence of Iran, another state with huge oil reserves, has emboldened Shi’a communities throughout the Middle East to be more pro-active in seeking concessions from their Sunni governments

Saudi Arabia’s oil sector accounts for around 87% of its budget revenues, and that oil is concentrated where much of the Shi’a population is concentrated, with many working in the industry.1 Which helps explain why an uneasy co-existence is maintained by the Saudi rulers: oil is the Kingdom’s life-blood, any action which might damage the industry would be catastrophic. Shi’a populations in other Gulf states (notably Kuwait in 1986) have shown that they are capable of striking at the oil industry and causing enormous damage.

Yet because of the Saudi monarchy’s role as the Custodians of the Two Holy Mosques (Mecca and Medina), the holiest sites in Islam, any further compromise with their Shi’a minority would be seen by many Sunnis as a fundamental dereliction of religious duty.2 The Wahhabi form of Sunni Islam espoused by the Saudi royal family rose to prominence on its claim to unsullied religious piety and purity. This impacts on how the Kingdom engages not only with their own Shi’a population, but also with Shi’a communities across the Middle East and especially the (Shi’a) Islamic Republic of Iran.

Iran and the Shi’a Awakening

The rising influence of Iran, another state with huge oil reserves, has emboldened Shi’a communities throughout the Middle East to be more pro-active in seeking concessions from their Sunni governments. This growing confidence has been labelled the ‘Shi’a Awakening’ or the ‘Shi’a Crescent’ (a reference to the broad shape of the geographical areas inhabited by Shi’a populations across the region). Shi’a Muslims are a sizeable minority in most countries across the Middle East, and a majority in Iran, Iraq and Bahrain (as well as forming the larger part of Lebanon’s Muslim population).


The Shi’a Awakening and the rise of Iran has given Saudi Arabia the opportunity to present itself as the defender of Sunni interests. For instance, it has funded Sunni militias in Syria (countered by Iranian funded Shi’a militias, most notably Hizbullah). More recently, Saudi Arabia, with the backing of Bahrain and the United States, intervened in Yemen after the Shi’a Houthi movement captured the capital and promptly offered a commercial flight route to Iran. Saudi Arabia, desperate not to allow Iran a toe-hold on the Arabian peninsula, took immediate military action. That war is ongoing.

Tensions are also rising in Lebanon, where, yet again, Iran and Saudi Arabia are backing rival factions.

To date, Iraq has been Iran’s biggest victory in this regional-sectarian struggle – with Iranian backed militias and political allies taking control in the wake of the US-led invasion. Which is where the religious ‘purity’ comes into play – the Sunni militias who would have been Saudi Arabia’s natural allies hated the Saudi government for not being the ‘pure Sunni Muslims’ they presented themselves to be. Particularly unforgivable in the eyes of ISIS and al-Qa’ida, was the fact that the Saudis had allowed non-Muslim soldiers on the Holy Arabian Peninsula during the Gulf War, although the ongoing presence of western businesses in Saudi Arabia was also a cause of upset. Therefore, Iran was able to extend its influence in Iraq because Saudi Arabia was unable to mount an effective counter-strategy.

If Saudi Arabia was not so dependent on the oil sourced from Shi’a-populated areas, they would have little reason to maintain that accord. A dramatic fall in the oil price could trigger an escalation in conflict.

A $10 oil scenario could be viewed by the Saudi government as an opportunity to move more aggressively against the Shi’a minority

What happens if the oil price falls

The price drop would, of course, be catastrophic for Iran as well as Saudi Arabia. Indeed, both countries have recognised the dangers posed by their over-reliance on oil and are seeking to diversify their economies. The recent purge of top officials orchestrated by Crown Prince Mohammed bin Salman in Saudi Arabia is part of the same dynamic: putting the ‘house’ in order to curb expenditure and attract alternative investment. The Iran nuclear deal can be seen in much the same way.

For the Saudis, however, the objective of maintaining their religious legitimacy by not allowing the Arabian Peninsula to be further ‘polluted’ with non-Islamic influences would remain. In this context a $10 oil scenario could be seen by the Saudi government as an opportunity to move more aggressively against the Shi’a minority. A heavily diminished oil industry may in fact prompt the Shi’a minority to leave of their own accord to look for work elsewhere (they are barred from working in government or the military).

That displacement might be a best-case scenario. More catastrophically, a dramatic fall in the oil price could lead the Saudis to forcibly expel or violently oppress their Shi’a population, which might provoke Iran to intervene. At that point, $10 oil could shift Saudi Arabia and Iran from proxy wars into all out war.

  1. Dilip Hiro, ‘A Matter of Crude Politics’, The Guardian, 12 December 2006
  2. It’s worth noting that, although Iran has some important Shi’a sites such as the Imam Reza Mosque in Mashhad, the holiest sites: Najaf and Karbala, are in Iraq. The Imam Ali Mosque in Najaf is the resting place of the Fourth Caliph. Karbala is where Hussayn was murdered in 680CE. An event which is commemorated by the Shi’a every year in the Festival of Ashura.

Sean is a researcher and writer on global religious trends and their relationship with public policy in the inter-related fields of counter-extermism, religious networks, identity and citizenship. He is currently a Research Associate of the Oxford Centre for Christianity and Culture, Regents Park College, University of Oxford and has done consulting work with a range of NGOs and the EU.