Russia Capitalizes on Energy Crisis After Strait of Hormuz Closure

The closure of the Strait of Hormuz following a military campaign by the United States and Israel against Iran has triggered a global energy crisis, significantly benefiting Russia. As Iranian forces blocked the critical conduit, global oil prices surged, pushing Russian export prices from under $40 per barrel in December to approximately $62 per barrel. This surge has allowed Moscow to fund military operations in Ukraine and trade crude at premium prices, bypassing Western price caps.

Russia has aggressively repositioned its energy trade toward Asia to fill the supply gap. India and China have increased their intake of Russian crude via tankers and pipelines, while Novatek restarted Yamal LNG shipments to China. The Kremlin is also negotiating with new buyers in Vietnam, Thailand, the Philippines, Indonesia, and Sri Lanka. President Vladimir Putin attributed Europe's energy struggles to the mistaken policies of European governments and suggested pivoting supplies away from the European market.

Despite these gains, Russia faces operational headwinds. Ukrainian drone attacks on refineries and the Sheskharis oil terminal, combined with severe winter weather at Baltic ports, have threatened a production decrease of 1 million barrels per day. While the U.S. attempted to offer political risk insurance for Gulf transit and suggested Venezuelan oil as an alternative, infrastructure failures and supply shortages have limited the effectiveness of these measures.