The Trump administration has set a June deadline to end the war in Ukraine, but the conflict now engulfing Iran may be helping to finance the war Washington is trying to stop.
Russian oil prices have climbed from under $40 a barrel as recently as December to roughly $62 a barrel since U.S. and Israeli strikes on Iran dramatically curtailed tanker traffic through the Strait of Hormuz, pushing Kremlin energy revenues back above the benchmark Russia’s Finance Ministry needs to fund its military campaign, the Associated Press reported.
The Iran war’s disruption of Middle East oil and gas supplies and soaring prices are strengthening Russia’s ability to profit from its energy exports, a pillar of the Kremlin’s budget and a key to paying for its own war in Ukraine. This comes amid the interruption of almost all tanker traffic through the Strait of Hormuz, the conduit for some 20% of the world’s oil consumption.
Russian oil still trades at a considerable discount to international benchmark Brent crude, which has risen above $82 from the closing price of $72.87 on Friday, the eve of the attack on Iran by the U.S. and Israel. However, Russian crude is now above the benchmark of $59 per barrel that was assumed in the Russian Finance Ministry’s budget plan for 2026. Oil and gas tax revenues account for up to 30% of the Russian federal budget.
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Additionally, the halt in production of ship-borne liquefied natural gas, or LNG, by major supplier Qatar will sharply increase global competition for available cargoes, including those from Russia.
A change in fortunes
Russia had seen state oil and gas revenue fall to a four-year low of 393 billion rubles ($5 billion) in January and the budget shortfall of 1.7 trillion rubles ($21.8 billion) for that month was the biggest on record, according to Finance Ministry figures.
The lower revenue was due to weaker global prices and to deep discounts fueled by U.S. and European Union hindrance of Russia’s “shadow fleet” of tankers with obscure ownership used to sell oil to its biggest customers, China and India, in defiance of a Western-imposed price cap and sanctions on Russia’s two biggest oil companies, Lukoil and Rosneft.
Economic growth has stagnated as massive military spending has leveled off. President Vladimir Putin has resorted to tax increases and increased borrowing from compliant domestic banks to keep state finances on an even keel in the fifth year of the war.
“Russia is a big winner from the war-related energy turmoil,” said Simone Tagliapietra, energy expert at the Bruegel think tank in Brussels. “Higher oil prices mean higher revenues for the government and therefore stronger capability to finance the war in Ukraine.”
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Amena Bakr, head of Middle East and OPEC+ insights at data and analytics firm Kpler, wrote: “With Middle East barrels facing logistical disruption, both India and China face strong incentives to deepen reliance on Russian supply.”
Additionally, the price of future delivery of natural gas has skyrocketed in Europe, raising questions about EU plans to put an end to imports of Russian LNG by 2027, reviving bad memories of a 2022 energy crunch after Moscow cut off most supplies of pipeline gas due to the war.
Length of strait’s closure is the key factor
Much depends on how long the Strait of Hormuz remains closed to most ship traffic, said Alexandra Prokopenko, an expert on the Russian economy at the Carnegie Russia Eurasia Center in Berlin.
A quick exit from the conflict would return Brent prices to roughly $65 per barrel and “a short-lived spike would not fundamentally change” Russia’s budget picture, she said. A middle scenario in which some shipping resumes and oil stabilizes at around $80 per barrel would give Russia “some fiscal relief,” depending on how long the higher prices last.
A long-term closure with Iranian strikes damaging refiners and pipelines could send oil to $108 per barrel, accelerate inflation and push Europe to the edge of recession. “This scenario would bring the largest windfall to Russia,” she said.
Even several weeks of interruption in Gulf LNG could lead to calls in Europe to suspend plans to ban new Russian supply contracts after April 25, said Chris Weafer, CEO of Macro-Advisory Ltd consultancy.
“The EU is under even more pressure to work with the U.S. to find a solution to the Ukraine conflict and, very likely, to consider easing the plan for a total block for Russian oil and gas imports,” he said. “Countries such as Hungary and Slovakia and those who have been big buyers of Russian LNG, will press for that review.”
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In any case “the Russian federal budget will have a much better result in March,” Mr. Weafer said, due to lower discounts on Russian oil and “because there are eager buyers of Russian oil and oil products.”
Putin says European leaders have only themselves to blame
Mr. Putin said European governments were to blame for their energy predicament.
“What is happening today on the European markets, is, of course, above all the result of the mistaken policies of European governments in the energy sphere,” Mr. Putin said Wednesday on state TV.
He said that “maybe it would be more beneficial for us to halt (gas) supplies now to the European market, and leave for the markets that are opening and get established there,” adding that “it’s not a decision, but in this case what’s called ’thinking out loud.’”
Mr. Putin said he would have the government look into the issue.
Russia’s Deputy Prime Minister Alexander Novak said Wednesday that Russian oil was “in demand” and that Russia was ready to increase supplies to China and India, the Tass news agency reported.
The head of Russia’s sovereign wealth fund, Kirill Dmitriev, took a dig at European Commission President Ursula von der Leyen and EU foreign policy chief Kaja Kallas, writing on X that “surely the wise Ursula and Kaja have a backup LNG plan. Or maybe not.”
Belgium, France, the Netherlands and Spain have continued to import around 2 billion cubic meters of Russian LNG per month, and on top of that Hungary imports 2 billion cubic meters a month through the Turkstream pipeline across the Black Sea, Mr. Tagliapietra said. That would amount to 45 billion cubic meters in 2026, 15% of total gas demand for this year.
It’s “not easy to replace this in case the LNG market gets tighter with continued shutdowns in Qatar,” he said.
The broader context of the Kremlin’s fiscal position makes the timing of the price surge significant. Russia’s sovereign wealth fund has shrunk from $185 billion in 2021 to an estimated $35 billion today, according to Finance Ministry data cited by Euromaidan Press. The U.S. Treasury sanctioned Rosneft and Lukoil — Russia’s two largest oil companies — in October 2025. Treasury Secretary Scott Bessent said at the time: “Given President Putin’s refusal to end this senseless war, Treasury is sanctioning Russia’s two largest oil companies that fund the Kremlin’s war machine.” Ukrainian drone strikes separately cost the Russian oil sector more than 1 trillion rubles ($12.9 billion) in losses in 2025, according to The Moscow Times, citing Yevgeny Borovikov, deputy CEO of insurance broker Mains.
The crisis at the strait began Feb. 28 with what U.S. officials called Operation Epic Fury. Lloyd’s List Intelligence data showed traffic through the Strait of Hormuz plunged on March 1: By 1800 UTC, just seven smaller tankers and one gas carrier had transited the passage, far below the normal daily average of 107 cargo-carrying vessels. Mr. Trump announced Tuesday he had ordered the U.S. Navy to escort tankers through the strait if necessary and directed the U.S. Development Finance Corporation to provide political risk insurance for maritime energy trade, according to CNBC.
The Times reported Monday that natural gas futures in Europe jumped more than 40% after Qatar halted LNG production, one of the sharpest single-day spikes since Russia’s 2022 invasion of Ukraine. Kpler vessel-tracking data show that roughly 50% of India’s crude oil imports and as much as 60% of its LNG imports move through the Strait of Hormuz — giving New Delhi a powerful incentive to lean on Russian supply.
Hungary, one of the EU’s most vocal opponents of Ukraine aid and sanctions on Russia, has deepened its reliance on Russian energy pipelines even as the broader bloc moves toward phasing out Russian imports. The Times reported last week that Hungarian Prime Minister Viktor Orbán threatened to block a major EU loan to Ukraine over a pipeline dispute — a dynamic the Hormuz crisis is likely to intensify.
The stakes for Ukraine are direct. The Trump administration’s June deadline for the warring parties to reach a settlement is nearing, but analysts say a Moscow buoyed by renewed energy revenue may feel less urgency to negotiate.
The Associated Press’ David McHugh contributed to this report.
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