How war in Iran is silently fueling another conflict, thousands of kilometres away

Russia launches massive strikes on Ukraine's gas sites

The ongoing war in Iran has left a deep economic impact across the world, with global markets tumbling and oil prices surging. But what has largely gone under the radar is that the Middle East war is also indirectly affecting another major conflict: Russia’s invasion of Ukraine.

Rising oil prices and disruptions in global energy supply chains, particularly due to the closure of Strait of Hormuz, are boosting Russia's energy revenues and firming up President Vladimir Putin's ability to sustain its ongoing military campaign in the region.

Iran war: Live updates

The conflict between US-Israel and Iran has severely disrupted traffic through the Strait of Hormuz, one of the world’s most critical energy chokepoints that carries roughly a fifth of global oil and liquefied natural gas shipments.

With tanker movement through the route sharply curtailed, many countries have turned to alternative suppliers, including Russia.

According to the Kremlin, demand for Russian oil and gas has risen significantly since the conflict began. Kremlin spokesman Dmitry Peskov said Russia is seeing a “significant increase in demand” for its energy exports as markets search for stable supplies.

Last week, US announced that it would give a temporary 30-day waiver to India to purchase Russian oil already stranded at sea to stabilise global markets.

The shift has already pushed prices of Russia's flagship Urals crude oil sharply higher.

Traders say the oil is now being sold at a premium to Brent crude for deliveries to India, the first time such a premium has been recorded, Reuters reported earlier.

Before the outbreak of hostilities, Urals crude was trading at a discount of $10–13 per barrel due to Western sanctions imposed after Russia’s 2022 invasion of Ukraine. It is now commanding a premium of about $4–5 over Brent for shipments scheduled for March or early April.

The price surge reflects a sharp shift in demand from refiners, particularly in Asia, after supplies from parts of the Middle East became uncertain.

US has repeatedly said that Russia’s key source of revenue for funding its war against Ukraine in energy. Infact, the Trump administration had even accused India last year of "financing the war by buying oil from Russia".

Before the war, Russian President Vladimir Putin was facing difficult economic choices amid mounting pressure on finances.

“The (Russian) government was facing tough choices and had to cut its spending and raise taxes and even consider some reduction in military expenditure,” Sergey Vakulenko, a senior fellow at the Carnegie Russia Eurasia Centre, told Politico.

However, the situation changed after US and Israel launched strikes on Iran, triggering retaliation from Tehran and escalating the conflict into a broader regional war.

"Suddenly, Moscow received this gift ... They had their lifeline,” Vladimir Milov, a former deputy energy minister turned Kremlin critic in exile, told Politico. He claimed that Russian officials are now “very, very happy.”

Oil shock

Meanwhile, oil markets have surged globally as well with Brent prices rising around 25 per cent in the past week. Russian Urals crude has seen an even sharper jump, rising nearly 50 per cent to about $68.6 per barrel from $45.7 earlier.

The disruption in Gulf energy supplies is creating favourable conditions for Russia’s export revenues, even as the country remains under extensive Western sanctions aimed at curbing its war financing.

Not just oil, the Iran war has also roiled global gas markets. Russia, a major natural gas exporter, could also benefit here as supply disruptions spread across the Gulf region.

Countries that previously reduced their dependence on Russian energy may now be forced to reconsider alternative supply arrangements as the war continues.

Higher oil prices are particularly significant for the war in Ukraine because energy exports remain a major source of revenue for the Russian government.

Ukraine has repeatedly targeted Russian oil and gas facilities in long-range strikes to weaken Moscow’s ability to fund the war.

But rising global prices could offset some of those losses. Analysts warn that if the crisis in the Persian Gulf continues, Russia could generate additional funds from energy exports, potentially strengthening its financial capacity to sustain the conflict.