The disruption of Middle East oil and gas supplies due to the Iran war has led to soaring energy prices, significantly strengthening Russia's ability to profit from its energy exports, which are a crucial pillar of the Kremlin's budget and a key source of funding for its war in Ukraine [1]. Prices for Russian oil exports have increased from under $40 per barrel in December to about $62 per barrel, driven first by fears of war and then by the interruption of almost all tanker traffic through the Strait of Hormuz, which is responsible for transporting approximately 20% of the world's oil consumption [1].
Despite Russian oil trading at a considerable discount to the international benchmark Brent crude, which has risen above $82 from $72.87 on the eve of the U.S. and Israel attack on Iran, Russian crude is now priced above the $59 per barrel benchmark assumed in the Russian Finance Ministry's budget plan for 2026 [1]. Oil and gas tax revenues account for up to 30% of the Russian federal budget [1]. The halt in production of ship-borne liquefied natural gas (LNG) by Qatar, a major supplier, is expected to sharply increase global competition for available cargoes, including those from Russia [1].
Russia had previously seen state oil and gas revenue fall to a four-year low of 393 billion rubles ($5 billion) in January, with a budget shortfall of 1.7 trillion rubles ($21.8 billion) for that month, the largest on record, according to Finance Ministry figures [1]. The lower revenue was attributed to weaker global prices and deep discounts caused by U.S. and EU actions against Russia's "shadow fleet" of tankers, which are used to sell oil to China and India in defiance of Western-imposed price caps and sanctions on Lukoil and Rosneft, Russia's two biggest oil companies [1].
Economic growth in Russia has stagnated as military spending has leveled off, prompting President Vladimir Putin to resort to tax increases and increased borrowing from domestic banks to maintain state finances during the fifth year of the war [1]. According to Simone Tagliapietra, an energy expert at the Bruegel think tank, "Russia is a big winner from the war-related energy turmoil," as higher oil prices mean higher government revenues and a stronger capability to finance the war in Ukraine [1]. Amena Bakr, head of Middle East and OPEC+ insights at Kpler, notes that logistical disruptions in the Middle East incentivize India and China to deepen reliance on Russian supply [1].
The price of future delivery of natural gas has also skyrocketed in Europe, raising questions about the EU's plans to end imports of Russian LNG by 2027 and reviving concerns reminiscent of the 2022 energy crunch after Moscow cut off most pipeline gas supplies due to the war [1].
CONCLUSION
The Iran war has caused a surge in global energy prices, benefiting Russia by increasing its oil and gas revenues and strengthening its ability to finance the war in Ukraine. The disruption has also intensified competition for LNG and raised concerns about Europe's energy security. Overall, the market impact is high, with Russia emerging as a significant beneficiary of the current energy turmoil.