Global Supply Hit, Russia Is Still Earning Every Day From Oil Amid Iran War

As the US-Israel-Iran conflict enters its third week with no signs of de-escalation, Iran's chokehold over the Strait of Hormuz has forced all oil importing countries to scramble for alternative supply routes. Interestingly, this is turning out to be a shot in the arm for Russian oil industry, which has been reeling under US sanctions since it began its war against Ukraine in 2022.

According to a report by The Financial Times, Moscow has gained considerably due to the surge in crude oil prices. Russia is earning up to $150 million a day in additional budget revenues from oil sales as the Iran war rages on, the report added. Significantly, Russia's Urals crude, which was selling at $52 per barrel till about two months, is now selling at $70-$80 per barrel.

Consequently, Russia is estimated to have earned $1.3 billion-$1.9 billion in extra tax revenue from oil exports in the first 12 days of the Iran war. As per estimates, Russia could rake in $3.3 billion-$5 billion in additional revenues by the end of this month if Iran's grip remains firm on the Strait of Hormuz. FOLLOW LIVE UPDATES

Despite Ukraine's President Volodymyr Zelenskyy's opposition to the US cutting a slack for Moscow, the Donald Trump administration has granted a 30-day waiver on Russian oil sanctions amid the ongoing Iran war.

Russia, China Buying More Russian Oil

Since the fresh escalation began in Iran on February 28, the largest oil importers - India and China - have turned to their all-weather ally Russia again. The two largest Asian economies were already the biggest buyers of Russian crude after Western sanctions were imposed in 2022. Now, they have increased their energy purchases further to avoid inflation risks.

Compared to February, imports to China and India from Russia have increased by around 22 per cent, according to analysts. In particular, India is purchasing about 1.5 million barrels per day, as per estimates quoted in the Financial Times report. Similarly, China's total seaborne crude imports from Russia registered a 17 per cent rise in February, according to a report by the Centre for Research on Energy and Clean Air.

Analysts cited in the report further said that every $10 rise in the average monthly oil price adds about $2.8 billion to Russian exporters' revenues. This roughly generated $1.63 billion in revenue for the Kremlin through taxes.

Therefore, several geopolitical and economic analysts are calling Russia the biggest beneficiary of the Iran war. Earlier this year, energy revenues had fallen nearly 50 per cent year on year in Russia. As a result, the country's budget deficit had inched close to the full-year target. However, the current rally in oil prices provides the much-needed shot in the arm for the Russian economy. In fact, Russia is currently producing about 300,000 barrels per day -- below its OPEC+ quota. So, it has room to further increase its production, and make the most of the prevailing market conditions.

How Oil Markets Could Fare This Week?

Late on Friday, US President Donald Trump threatened to extend attacks to Iran's energy infrastructure if Tehran continues to attack oil tankers passing through the Strait of Hormuz, through which roughly one-fifth of global oil supply normally passes each day.

On the other hand, Iran's leadership are convinced that they should continue using the Strait of Hormuz as leverage. Meanwhile, operations have been interrupted in other Gulf nations due to Iranian missile and drone strikes. As of now, analysts don't see a breakthrough on the horizon.

In the last week alone, crude benchmark Brent have surged 11 per cent. However, energy-dependent India has been reaching out to Iran to let India-bound vessels pass through. If the diplomatic efforts succeed, it could calm the Indian benchmark indices, which have crashing since the war began. To provide relief, the International Energy Agency has also vowed to release a record 400-million-barrels reserve.

This, however, has failed to calm the markets' nerves. Inflation fears due to the expected rise in fuel and LPG prices has triggered an equities' sell-off. While Indian investors have already shed Rs 33.68 lakh crore so far due to the war in Iran, Nifty50 may drop below the psychologically important 23,000-mark this week, if there is no breakthrough. On March 13, Nifty fell 488 points to settle at 23,151. If the Nifty, which is already in "technical correction", goes sub-23,000, it could lead to higher market volatility and confirm a bearish trend - making immediate recovery unlikely.