Some have suggested that in response to the alleged Iranian assassination plot, Saudi Arabia could retaliate by driving down the price of oil, hurting Iran by lowering its oil revenues and by capturing market share from specific customers. However, it should be noted that Iran has the capacity to drive the price of oil much higher (and faster) than Saudi does to drive it lower. If the Iranians felt their vital interests were endangered by this kind of oil price war, the Saudis would almost certainly lose -- not only this contest, but quite possibly some of their own physical assets.
Iran's mechanism for raising prices would not likely be a decision to reduce its own output (that would net reduce Iranian revenues while other suppliers stand to benefit), but instead a "decision to reduce" other suppliers' output.
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