CNBS: Russia benefits from rising oil prices amid Middle East war

Russia is emerging as a major beneficiary of the ongoing war between the US-Israel and Iran, as higher oil prices and temporary sanctions relief boost both the value and volume of its crude exports, analysts told CNBC.

The Middle East tensions have rattled global energy markets, sending oil prices sharply higher amid fears of supply disruptions in the Strait of Hormuz, one of the world’s most critical energy corridors.

“Russia stands to gain revenue from higher oil prices, especially as the U.S. has relaxed restrictions on selling Russian crude to India,” said Saul Kavonic, head of energy research at MST Marquee.

Oil prices surged above $100 per barrel on March 9 as traders priced in the risk that the conflict in the Gulf could disrupt shipments through the Strait of Hormuz, which carries roughly a fifth of the world’s oil supply. Even after falling about 7% on March 10 following remarks from U.S. President Donald Trump that the conflict could end soon, prices remain around 27% higher than before the war began.

For Russia, one of the world’s largest oil exporters despite Western sanctions following its invasion of Ukraine, the price rally directly translates into stronger state revenues. Henning Gloystein, managing director for energy and resources at Eurasia Group, said Russia has “already hugely benefited” from the crisis after Washington granted India a temporary waiver to continue purchasing Russian crude.

“Cargoes have been sold around $90 per barrel, so this is a large increase in price and sales volume for Russia,” he added, compared to around $50 before the Iran war. Analysts noted that higher prices combined with looser enforcement of sanctions allow more Russian barrels to remain in circulation, providing a short-term boost to Moscow’s finances.

Muyu Xu, a senior analyst at Kpler, said renewed buying from India has helped lift Russian crude prices while clearing a backlog of cargoes that had accumulated at sea. According to Kpler data, Russian crude held on tankers fell to 118.3 million barrels this week from 132.9 million barrels at the end of February, suggesting cargoes were moving quickly to buyers.

The military conflict in the Middle East has led to the largest disruption in oil supplies in history, according to data from Rapidan Energy Group. Analysts said no producers currently on the market could fully compensate for the decline in oil supplies from Persian Gulf countries, with the situation in the Strait of Hormuz affecting roughly 20% of global supplies.

By Sabina Mammadli