Russia has inadvertently emerged as one of the very few beneficiaries of the Iran war, as the conflict threatens oil shipments from the Middle East. With global energy markets tightening sharply, prices have risen, and traders are scrambling for alternative sources of crude oil. Russian oil, long constrained by Western sanctions, has become significantly more valuable and sought after.
Before the outbreak of the Iran war, Russian crude had been selling at a steep discount because of the sanctions imposed after Moscow’s invasion of Ukraine in 2022. The United States and its allies introduced price caps and restrictions on shipping, insurance and financial services connected to Russian oil exports. The aim was to reduce the Kremlin’s energy revenues and limit its ability to finance the war.
Those measures forced Moscow to sell oil below global benchmarks in order to attract buyers willing to navigate the sanctions regime. For much of this period, Russian crude traded at a discount of $10 to $13 per barrel compared with international benchmarks.
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The war with Iran has dramatically altered that dynamic. As tensions escalated in the Gulf and Iran threatened shipping in the Strait of Hormuz, one of the world’s most important energy chokepoints, oil markets tightened rapidly. As tanker traffic slowed, insurance premiums and supply concerns rose, spooking global markets. It has given Russia, with its large export volumes and established trade routes to Asian markets, an opening to fill the gap.
Once forced to offer steep discounts, Russia now sits pretty, commanding a premium of $4 to $5 over Brent for deliveries to India. It shows how quickly the conflict has transformed the structure of global oil markets. Since the outbreak of the Ukraine war in 2022, Indian refiners have been buying large volumes of discounted Russian crude, which changed only recently when the United States imposed tariffs on countries continuing to import sanctioned Russian oil. Yet as the Iran war tightened global supplies, Washington granted India a special 30-day waiver to purchase hundreds of millions of barrels of Russian oil stranded at sea.
The decision reflects the dilemma now facing the United States. For years, Washington has sought to isolate Russia’s energy sector through sanctions. But the conflict in the Gulf has created an urgent need to stabilise oil markets and prevent further price spikes. US Treasury Secretary Scott Bessent acknowledged this tension when announcing the waiver. The Trump administration, he said, is considering lifting sanctions on additional Russian oil shipments in order to “create a supply” and bring relief to domestic and international markets.
Officials have stressed that these steps are temporary and narrowly targeted. According to the US Treasury, they are not intended to weaken the broader sanctions regime imposed on Moscow for its actions in Ukraine. Instead, they are meant to alleviate the pressure created by Iran’s threats to global energy flows.
At the same time, Washington is trying to stabilise shipping in the Gulf itself. The US International Development Finance Corporation plans to provide $20 billion in war reinsurance for vessels operating in the region. The aim is to reassure insurers and encourage the resumption of oil and liquefied natural gas shipments through the heavily contested Strait of Hormuz.
Even so, the war has already reshaped the economics of global oil trade. The sharp rise in demand for Russian crude has strengthened Moscow’s position in the market just as Western sanctions had begun to squeeze its revenues. Russian officials have openly acknowledged the opportunity created by the disruption in the Gulf. Deputy Prime Minister Alexander Novak said Moscow was prepared to increase shipments to Asian buyers as demand grows. “We are always ready. Russian oil is in demand. We will sell it if it is purchased,” he told reporters.
For the Kremlin, the war in the Gulf has produced an unexpected windfall. At a moment when Western sanctions were intended to weaken Russia’s energy sector, the disruption of Middle Eastern supplies has instead restored the strategic importance of Russian oil in global markets.
