When the news is simultaneously very good and very bad, an odd silence descends upon an oil trading desk. The screens on Moscow’s energy floors lit up in ways that traders typically only see in disaster drills in late February, when the first reports surfaced that the US and Israel had begun a massive campaign against Iran. For the first time since Russia invaded Ukraine in 2022, Brent crude broke $100 per barrel. It had reached $119 by the beginning of March. A spreadsheet that had been flashing red for months abruptly turned green somewhere in the finance ministry of the Kremlin. The world was rushing for barrels because the Strait of Hormuz had practically closed, not because anything had improved in Russia.
One of those instances where geopolitics becomes almost embarrassingly obvious is what transpired next. Shipping traffic virtually stopped as a result of Iran’s threats against any ship passing through the Strait, according to maritime trackers. That narrow corridor is used for about 25% of the world’s seaborne oil trade. Following a drone attack, production at Qatar’s Ras Laffan gas facility, which produces about a fifth of the world’s LNG, was suspended.
At one of its refineries, Saudi Aramco halted operations. Suddenly, nations that had distanced themselves from Russian crude for three years started discreetly picking up the phone once more. India began making large purchases again after negotiating a lower intake of Russian oil. In early March, the US Treasury even waived sanctions for 30 days, enabling Indian refineries to discharge Russian crude that was stuck on tankers at sea. Stabilizing domestic gas prices in the United States was the official rationale. In actuality, the 10–20% discount Russian oil had been trading at compared to Brent was eliminated.
The scale of the numbers that followed is almost comical. According to data gathered by the Kyiv School of Economics, Russia’s daily earnings from oil exports increased to $760 million. Within two weeks of the strikes on Iran, fossil fuel revenues increased from a post-invasion low of about $501 million per day in January to about $554 million per day. According to Sergey Vakulenko of the Carnegie Russia Eurasia Center, the windfall was estimated to be close to $9 billion per month, which would have allowed Putin to postpone planned budget cuts that would have caused political pain. “What he was spending on the war meant he was basically pawning the country,” Vakulenko said to CNBC. “Now, he doesn’t have to do that anymore.”
The windfall itself might not be the deeper story here, but rather the void it reveals. The global system shows how thin the bench is when Saudi tankers sit in harbors with nowhere to go, when Iranian oil becomes unreliable, or when Qatari LNG stops loading. Despite all the sanctions, shadow fleets, and price ceilings, Russia ends up being the supplier that consumers cannot physically avoid but cannot politically love. According to the Financial Times, Asian refiners went “desperate” practically overnight. Imagine the scene in a trading office in Seoul or Mumbai: procurement officers pretending not to notice that the cheapest barrels are coming out of Primorsk and Ust-Luga, legal teams working through compliance memos, and spreadsheets being rebuilt.
There is more uncertainty in the longer view. Throughout March and April, Ukraine used its own drones to attack Russian oil export infrastructure, causing damage to terminals at Primorsk, Ust-Luga, and Novorossiysk. Brent fell 13% in a single session following the announcement of a US-Iran ceasefire in early April. Russia’s Treasury waiver expired without being promptly renewed. Additionally, Russia’s economy remains in what former NATO General Richard Shirreff referred to as the “death zone,” with the central bank’s policy rate remaining at 15% and inflation at 5.9%. For a while, a climber above 8,000 feet can still breathe, but the body is consuming itself below.
As this develops, it’s difficult to ignore how quickly the ethical framework of energy markets collapses in the event that the lights go out. Three years of Western sanctions, meticulous policy coordination, price ceilings, and limitations on shipping insurance were all bent to accommodate a single, brief, acute Gulf crisis. How long the Strait remains partially closed, how patient the Gulf storage tanks remain, and whether the next headline from Tehran calms or rekindles the panic are all factors that no analyst can predict will determine whether that bend turns into a break.
