The Kremlin announced on Friday that the ongoing United States-Israeli war on Iran has triggered a significant rise in demand for Russian oil and gas. This development comes just a day after the U.S. Treasury issued a 30-day waiver allowing India to purchase Russian oil currently stranded at sea, highlighting the shifting dynamics in global energy markets.
Market Disruption and Strategic Shifts
The conflict, now in its seventh day, has effectively shut down the Strait of Hormuz, a critical shipping passage that handles a fifth of the world's oil and liquefied natural gas supplies. This disruption has left countries scrambling for alternatives, with Russia emerging as a potential beneficiary despite its own ongoing war in Ukraine, now in its fifth year.
Kremlin spokesman Dmitry Peskov emphasized Russia's reliability as an energy supplier during a press briefing. "We are seeing a significant increase in demand for Russian energy resources in connection with the war in Iran," Peskov stated. "Russia has been and remains a reliable supplier of both oil and gas—including pipeline gas and liquefied natural gas." He added that Russia maintains the capacity to guarantee delivery continuity for all contracted supplies, though he declined to specify potential volumes for India following the U.S. waiver.
Warnings Against Renewed Reliance
Also on Friday, International Energy Agency Executive Director Fatih Birol cautioned against turning back to Russia for energy needs. "The current crisis in the Middle East has led to questions in some quarters about whether to go back to Russia or not," Birol told reporters after a meeting with European Commission President Ursula von der Leyen and EU commissioners. He labeled such a move as economically and politically misguided, pointing to Europe's historical mistake of overreliance on a single country for energy.
Birol acknowledged logistical disruptions from the war but noted there is "plenty of oil" in the global market. The EU faces mounting pressure from industries and governments to curb high energy prices, with von der Leyen promising to present options at a summit later this month.
Gulf Producers Brace for Shutdowns
Qatar's Energy Minister Saad al-Kaabi warned in an interview with The Financial Times that all Gulf energy producers could halt exports within weeks if the conflict persists and drives oil prices to $150 a barrel. Qatar has already suspended its liquefied natural gas production, which accounts for about 20% of global supply and plays a key role in balancing Asian and European demand.
"Everybody that has not called for force majeure we expect will do so in the next few days that this continues," al-Kaabi said. "All exporters in the Gulf region will have to call force majeure." He predicted that continued conflict would impact global GDP growth, lead to higher energy prices, shortages of some products, and a chain reaction of factory disruptions.
Even if the war ended immediately, al-Kaabi estimated it would take Qatar "weeks to months" to resume normal delivery cycles. He forecast crude prices could hit $150 a barrel in two to three weeks if shipping through the Strait of Hormuz remains blocked, with gas prices potentially rising to $40 per million British thermal units.
Immediate Market Impact
On Friday, benchmark U.S. crude surged 4.1% to $84.36 per barrel, while Brent crude, the international standard, gained 1.7% to $87 per barrel. Both were trading near their highest levels since April 2024, reflecting the immediate strain on global energy supplies.
The situation underscores a critical tradeoff for nations: securing immediate energy needs through Russian supplies versus adhering to long-term strategic and political considerations. As the conflict in Iran continues, the global energy landscape faces increasing volatility, with practical decisions on sourcing likely to have lasting economic and geopolitical repercussions.
