Temporary Beneficiary: Russia's gains from the Iranian war will be modest unless it escalates into a protracted conflict

Insignificant Iran

On 28 February, after Israel and the US began strikes on Iran, Brent crude oil prices jumped 13%, exceeding $80 per barrel. On 3 March, the price of oil futures had almost reached $85, before falling slightly. However, earlier, as tensions between the US and Iran escalated, prices rose from around $60–62 per barrel in December and early January to $70 by early February, i.e. an increase of 15%.However, overall, the market's reaction to the start of the war in the epicentre of global oil production can be described as restrained.

This is due to both by the overall market sentiment, which remains in a bearish, downward trend, and by Iran’s modest role in global oil production and supply. In fact, Iran ranks third in the world in terms of reserves (more than 200 billion barrels), after Venezuela and Saudi Arabia. However, due to prolonged international sanctions and resulting technological restrictions, the country produced only around 3.3 million barrels of oil per day and 1.3 million barrels of condensate and other liquid hydrocarbons in 2025, according to OPEC. This accounts for about 4.5% of global production (half as much as Russia and a third of that of the United States). As a result, Iran’s total production is close to the estimated global oil market surplus (S&P’s February estimate, based on data from the International Energy Agency (IEA), was 3.8 million barrels per day). This means that, hypothetically, even a complete halt in Iranian oil production would not constitute a critical shock for the global market.

Oil price developments since the beginning of 2026, US dollars per barrel

In 2025, according to Vortex, Iranian oil and condensate exports ranged from 1 million to 2.1 million barrels per day. More than 90% of this volume went to China, which received Iranian oil under sanctions at substantial discounts to the regional Oman/Dubai benchmark. According to Iran International, in February 2026 the discount was around $10–11 per barrel, or 16% of the benchmark. Consequently, Iranian oil has, for many years, effectively only been supplied to China and a few smaller buyers, such as Malaysia.

In addition, in 2025, China increased its total oil purchases by 4.4% to 11.6 million barrels per day. However, since March last year, amid falling oil prices, Beijing has been actively building up its own oil reserves, which, according to estimates by leading traders and analysts, are estimated to have reached about 1 million barrels per day. In effect, these excess purchases absorb another portion of the global oil surplus, and in the event of rising market tension and higher prices, China could temporarily curb them without significant disruption.

The bottleneck of the crisis

Therefore, the main risks of the war for the market do not lie in disruptions to Iranian oil supplies, but in threats to the region’s oil infrastructure and, in particular, to shipping through the Strait of Hormuz, through which 20% of global oil supplies, or up to 20 million barrels per day, pass. Kpler analysts point out that, in addition to crude oil, 10–20% of the world’s refined products and around 20% of global LNG from Qatar also transit the strait.

Even before the operation began, Iran hinted at the possibility of blocking the Strait of Hormuz, pressuring Gulf states to influence the US in pre-war negotiations. Following the initial strikes on 28 February, reports emerged that Iran intended to blockade the strait, but the Iranian Foreign Minister denied them. Shortly thereafter, an adviser to the commander-in-chief of the IRGC stated that the strait was closed and any ships passing through it would be attacked. Supporting this threat, Iranian forces struck the American tanker Skylight. According to estimates by JPMorgan Chase & Co, energy shipments through the Strait of Hormuz had already fallen fourfold: from the usual 19 million barrels per day (of which 16 million are oil) to 4 million on 28 February. According to Kpler, on the first day of the war, mainly tankers flying Iranian and Chinese flags continued to transit the strait. MarineTraffic data shows that by the afternoon of 3 March the Strait of Hormuz, which is normally crossed by several hundred tankers daily, was almost empty.

Saudi Arabia and the UAE could reroute some oil via pipelines to alternative maritime routes. However, Kpler estimates that the capacity of Saudi Arabia’s East–West Petroline to the Red Sea is 7 million barrels per day, while the local terminal has an even lower throughput. Once existing storage capacity is exhausted, the seven largest Middle Eastern oil producers, led by Saudi Arabia, will have to halt production if they are unable to supply oil through the Strait of Hormuz for more than 25 days, according to a JPMorgan report.

For the same reason, increasing oil production by OPEC+ countries at present makes little sense. In theory, they could raise output by 3.5 million barrels per day, but most of this capacity is concentrated in Saudi Arabia and the UAE, in areas subject to transport risks. At the OPEC+ meeting on 1 March, participants agreed to increase production by a modest total of 206,000 barrels per day (less than 0.2% of global output) from April, largely as a symbolic signal intended to reassure the market.

In addition to posing a threat to shipping in the Gulf, Iranian forces have carried out attacks against the region’s two largest oil and gas infrastructure facilities. A drone struck QatarEnergy facilities in the Ras Laffan industrial area, the world’s largest LNG production hub. In response, Qatari authorities announced a halt to fuel shipments, which led to a surge in wholesale gas prices (spot prices at Europe's largest hub, TTF, jumped by more than 50%, to almost €50 per MWh). A second drone strike targeted the Ras Tanura transport hub in Saudi Arabia, where the government also announced a partial suspension of operations. Both attacks were primarily symbolic in nature and intended to exert psychological pressure. According to AFP sources, the Saudi authorities are, for now, treating the drone penetration as an incident, but have warned that systematic strikes on oil infrastructure would prompt retaliatory attacks on Iranian oil fields. On 3 March, debris from an Iranian drone caused a fire in the Fujairah Oil Industry Zone in the UAE, one of the Middle East’s largest oil hubs.

The key question in this situation is how long the military confrontation will last. However, clarity on this issue is diminishing rather than increasing. On 1 March, Donald Trump estimated that the conflict could last four to five weeks, broadly corresponding to the capacity of oil storage facilities in the event of a halt to shipping. However, on 2 March, following Iran’s refusal to enter negotiations with the US, he hinted at the possibility of a longer war. Meanwhile, Ali Larijani, Secretary of Iran’s Supreme National Security Council and now a central figure in the country’s leadership, wrote on X that Iran, unlike the US, has prepared itself for a protracted war, and that its adversaries had ‘miscalculated’.

These remarks point to the likelihood of the most adverse scenario, in which the conflict evolves into a prolonged confrontation, effectively a war of attrition targeting US-Israeli missile capabilities and air defence systems. There is little doubt that, in such circumstances, Iran would intensify attacks on regional oil and gas infrastructure and logistics in order to raise pressure on the US through supply disruptions and price instability, thereby compelling Washington to scale back the operation before achieving its maximum objectives and allowing the Iranian regime to preserve its viability.

Two positive and two negative scenarios

A Bloomberg Economics review, seen by Re:Russia, outlines three principal scenarios. In the first, the US and Iran reach a relatively swift ceasefire agreement, seeking to minimise the costs of a prolonged conflict. In this case, the Islamic Republic would endure despite the elimination of its supreme leader and key military commanders. A ceasefire would remove the threat of oil supply disruptions, gradually reducing the risk premium in prices, which would return to their pre-war level of around $65 per barrel. However, an alternative outcome could also prove positive for markets: regime change in Tehran accompanied by a reduction in tensions. If a transition of power were to lead to internal chaos, Iranian production might come under threat, but this alone would be unlikely to trigger major global shocks.

The second and third scenarios imply that the war either 1) continues at its current level of intensity or 2) escalates as Iran carries out additional strikes against regional energy infrastructure and oil tankers. Iranian proxies in Iraq, Lebanon and Yemen could also become involved. Under these scenarios, oil prices could fluctuate around $80 per barrel if Tehran refrains from expanding strikes on neighbouring countries’ energy facilities (second scenario). A complete closure of the Strait of Hormuz could push prices as high as $108 per barrel (third scenario).

These forecasts are based on the experience of past crises. For example, during the 12-day war between Israel and Iran in June 2025, a 1% loss of supply led to an approximate 4% increase in prices. Iran accounts for around 5% of global production; consequently, the risk of a complete halt in Iranian output could raise prices by roughly 20%. Bloomberg Economics estimates that about 20% of global oil supplies pass through the Strait of Hormuz. If the strait were fully closed, prices could increase by as much as 80%, reaching $108 per barrel. Other forecasts broadly follow the same logic, indicating a price range of around $80–90 per barrel in adverse scenarios. In its February report, the IEA once again lowered its projections for oil demand growth in 2026 and noted that fundamental factors are likely to sustain downward pressure on prices, notwithstanding potential spikes linked to geopolitical tensions.

Temporary beneficiary

Analysts unanimously name Russia as one of the main beneficiaries of a new war in Iran. Oil exporters located far from the conflict zone, such as Russia, Canada and Norway, stand to gain, according to Bloomberg Economics. Amid logistical disruptions in the Middle East, Russia’s largest trading partners, China and India, have incentives to increase their reliance on Russian crude, Kpler analysts observe. India, which only recently reduced purchases of Russian oil under US pressure, substituting Middle Eastern supplies, would be the first to revert to cheaper supplies from Russia.

According to Vortexa, in February 2026, Beijing had already replaced supplies from Venezuela, which were suspended after the US blocked tankers off its coast, with Russian oil. Russian oil supplies to China in February reached 2.07 million barrels per day, 0.37 million more than in January. At the same time, Iranian oil supplies to China declined by 0.15–0.22 million barrels per day, to between 1.03 and 1.138 million barrels per day, according to Iran International. Although Iranian crude was reportedly offered to Chinese refineries at prices even lower than Russian oil, they prioritised stability against the backdrop of stalled US-Iran nuclear negotiations, whose collapse ultimately led to war. The likelihood of further increases in Russian purchases in such a scenario is very high.

According to Russian customs data, exports of Russian mineral products in 2025 amounted to 85% of their 2024 level, while oil and gas revenues accounted for only 76% of last year's total. In January 2026, oil and gas revenues, according to data just published by the Ministry of Finance, fell by half compared to January 2025. The situation is likely to improve somewhat over the next couple of months due to higher prices and export volumes. However, the price effect is likely to be temporary, and it remains unclear whether, once the Gulf crisis subsides, Washington will resume pressure on the Indian authorities to curtail purchases of Russian oil. A modest improvement in oil and gas revenues will not fundamentally alter Russia’s economic trajectory in 2026, but it could somewhat ease pressure on public finances and support certain budgetary investments. At the same time, a transformation of the US-Iran confrontation into a prolonged war, accompanied by sustained destabilisation of oil and LNG supplies from the conflict zone, would weaken one of the most significant external constraints on Putin’s war economy.