Rising energy prices from the Iran war could help Russia pay for fighting in Ukraine

Oil and gas prices are soaring after the Iran war choked off tanker supplies from the Middle East

FRANKFURT, Germany -- FRANKFURT, Germany (AP) — The Iran war's disruption of Middle East oil and gas supplies and soaring prices are strengthening Russia's ability to profit from its energy exports, a pillar of the Kremlin's budget and a key to paying for its own war in Ukraine.

Prices for Russia's oil exports have risen from under $40 per barrel as recently as December to about $62 per barrel — first on fears of war and then due to interruption of almost all tanker traffic through the Strait of Hormuz, the conduit for some 20% of the world's oil consumption.

Russian oil still trades at a considerable discount to international benchmark Brent crude, which has risen above $82 from the closing price of $72.87 on Friday, the eve of the attack on Iran by the U.S. and Israel. However, Russian crude is now above the benchmark of $59 per barrel that was assumed in the Russian Finance Ministry's budget plan for 2026. Oil and gas tax revenues account for up to 30% of the Russian federal budget.

Additionally, the halt in production of ship-borne liquefied natural gas, or LNG, by major supplier Qatar will sharply increase global competition for available cargoes -- including those from Russia.

Russia had seen state oil and gas revenue fall to a four-year low of 393 billion rubles ($5 billion) in January and the budget shortfall of 1.7 trillion rubles ($21.8 billion) for that month was the biggest on record, according to Finance Ministry figures.