Will the Israel–Iran war keep oil prices high — and hand Russia a windfall?
What happened?
Israel and Iran are now five days into a war, and the escalating conflict between the two regional powers is already rippling through global energy markets. On Friday, June 13 — the day the fighting began — Brent crude surged by 7 percent to $74 per barrel. At one point during the session, prices jumped as much as 14 percent to $78, marking the steepest single-day increase since Russia’s February 2022 invasion of Ukraine.
Iran holds some of the world’s largest oil reserves and is a key crude supplier to China. Since 2020, the country’s oil production has risen by 75 percent, reaching an estimated 3.4 million barrels per day. Despite U.S. sanctions, Iran’s total energy export revenues have quadrupled over the same period, reaching $78 billion in 2024, according to experts.
There are also fears that Iran could shut down the Strait of Hormuz — a narrow chokepoint between Iran and Oman that links the Persian Gulf to the Arabian Sea and beyond. In 2024, 21 percent of all global liquefied natural gas exports passed through the strait, mostly from Qatar, according to the research firm Kpler. As many as 20 million barrels of oil also pass through each day — roughly a fifth of global supply. So far, the threat remains hypothetical, but oil shipping rates from the Middle East to China have already jumped by 20–30 percent, and some tanker operators are canceling voyages altogether amid fears of further escalation.
Oil prices have cooled somewhat since the initial spike. On Monday, June 16, Brent slipped back to $73 a barrel — briefly dipping to $71 during the day — as investors appeared to start betting that the conflict would remain contained.
On Saturday night, Israel launched its first strikes on Iran’s oil and gas infrastructure, targeting, among other sites, the country’s largest natural gas field, South Pars, and the Shahran oil depot near Tehran. More significant, however, is what hasn’t yet been hit: Iran’s critical export infrastructure, including the Port of Kharg Island Oil Terminal in the northern Persian Gulf, through which nearly all Iranian oil is shipped. Homayoun Falakshahi, a senior analyst at Kpler, called it the “one clear target that would make it very easy if Israel or the United States wanted to impact Iran’s oil exports,” as quoted by The New York Times.
Meanwhile, reports that Iran may be seeking a ceasefire and is open to resuming nuclear deal negotiations with the United States have also helped ease oil prices.
So, we shouldn’t expect a lasting spike in oil prices?
It’s hard to say. Experts remain cautious in their forecasts, given the unpredictable nature of the new war. But most agree that the current level of escalation is unlikely to trigger a sustained spike in oil prices.
J.P. Morgan, for instance, has stuck with its conservative forecast for Brent crude to average $60 per barrel this year. That said, the investment bank acknowledged a potential worst-case scenario: prices could soar to $120–130 per barrel if the Strait of Hormuz is closed off.
Goldman Sachs has also held to its base-case estimate of around $60 per barrel by the end of the year. But the bank warned that prices could climb to $90 in the next six months if airstrikes on Iran’s oil infrastructure reduce output by 1.75 million barrels per day — nearly half the country’s current production.
Morgan Stanley, meanwhile, revised its forecast upward for the next quarter, raising it by $10 to $67.50 per barrel. Still, that’s well below the highs reached on the first day of the conflict — and even below current trading levels.
And if prices do rise, will Russia come out ahead?
That’s still difficult to say. The year 2025 has already posed a serious challenge for Russia’s federal budget. In the first five months alone, oil and gas revenues fell by more than 14 percent — with May’s figures plunging 35 percent, thanks in part to Donald Trump’s tariffs.
The 2025 budget was based on an average price of nearly $70 per barrel for Russia’s Urals crude. But over the past three months, Russian oil has traded at just $59, $55, and $52 a barrel, respectively, according to The Bell. The Finance Ministry now projects an annual average of $56 and a 24 percent drop in oil and gas revenues. And judging by current analyst forecasts, the Israel–Iran war isn’t expected to quickly change that outlook.
Still, even this price level is unlikely to spell disaster for the Russian economy. The government will likely be able to cover the widening budget deficit by increasing non-oil-and-gas revenues and using what remains of the National Wealth Fund.
The bitter truth is that events in Russia affect your life, too. Help Meduza continue to bring news from Russia to readers around the world by setting up a monthly donation.
Russian oil companies, too, have yet to see any real upside from the conflict in the Middle East, analysts at PSB Bank noted:
A strong ruble is limiting their ability to earn more. […] If the conflict escalates and drags on — and if it disrupts more than 2–2.5 million barrels per day of global oil supply — prices will continue to rise, which will benefit Russian producers. The clearest winners in that scenario would be export-oriented companies like Rosneft, Lukoil, and Surgutneftegas.
For now, the only concrete benefit Russia’s oil industry has seen from the new war is geopolitical: G7 countries have reportedly backed away from their earlier idea of lowering the price cap on Russian crude.
