The US-Israeli operation that killed Iran’s Supreme Leader Ayatollah Ali Khamenei on 28 February has done what four years of Russian budget planning could not: push the price of Russia’s crude oil back to the level Moscow needs to fund its war against Ukraine.
Russia’s 2026 federal budget assumes Urals crude at $59 per barrel—a figure Finance Minister Anton Siluanov called “fairly balanced” last September. It was anything but.
By January, Urals had slid to $50-54 per barrel. State revenues from taxing the oil and gas industries fell to 393 billion rubles ($5.1 billion)—down from 1.12 trillion rubles ($14.5 billion) a year earlier, the lowest since the pandemic.
If Iranian oil fields are hit, Russia could become “one of the few remaining producing countries.”
The combination of Western sanctions, Ukrainian drone strikes on refineries, and a new EU floating price cap had pushed Russia’s oil income into what Re:Russia analysts called Moscow’s “weakest point” in negotiations over the war.
Then the bombs fell on Tehran. Brent crude surged 13% to $82 per barrel—the highest since January 2025. Urals followed, hitting $59.8, its highest level since 2024 and right at the Kremlin’s budget assumption.
Kremlin envoy Kirill Dmitriev posted on X (which is banned in Russia): “$100+ oil per barrel soon.” Kremlin propagandist Vladimir Solovyov told his viewers: “For our budget, [the attack on Iran] is a big plus,” adding that if Iranian oil fields are hit, Russia could become “one of the few remaining producing countries.”
Moscow’s budget math fixes itself
Before the Iran strikes, Russia was bleeding revenue. The country’s 2025 budget deficit hit 5.65 trillion rubles ($73 billion)—the largest since at least 1996 and nearly double the original target.
The National Wealth Fund, meant to cushion exactly this kind of shortfall, had shrunk from $113 billion before the full-scale invasion to $52.2 billion. Gazprombank analysts warned it could be exhausted within a year.
Tanker traffic through the strait has effectively stalled, with export flows on 28 February falling to around 4 million barrels.
The Iran war changes that trajectory. JPMorgan analysts estimate that Gulf producers have roughly 25 days of onshore storage capacity before a Strait of Hormuz closure forces mandatory production shutdowns.
Tanker traffic through the strait has effectively stalled, with export flows on 28 February falling to around 4 million barrels—roughly a quarter of the normal daily rate. If the disruption drags on, Deutsche Bank projects Brent could reach $120; in a worst-case full closure scenario, JPMorgan has modeled $200.
China pivots—and Russia benefits twice
The price spike is only half the windfall. The demand shift compounds it.
China’s independent small- and mid-scale refiners import an estimated 99% of Iran’s crude exports—roughly 13% of Chinese seaborne crude imports in 2025. With those shipments disrupted, “Russia stands to benefit with Indian and Chinese demand likely shifting toward heavily discounted Urals, which would ease some pressure on the Kremlin from decreased crude pricing,” TD Securities analysts concluded.
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India is also considering resuming Urals purchases.
Commodity intelligence firm Kpler assessed that “the conflict is materially improving Russia’s competitive position in crude oil markets.” India, which had begun reducing its purchases of Russian oil under US pressure, is also considering resuming Urals purchases.
Pressure reversed
On the same day US jets struck Tehran—28 February—Euromaidan Press published an analysis arguing that four years of Western sanctions had failed to deliver the economic shock needed to constrain Russia’s war machine: “Lists are not the same as shock.”
Ukrainian drone strikes had damaged refineries throughout 2025.
Russia’s January 2026 oil revenues had sunk 46% compared to January 2025, according to Reuters calculations. The EU had tightened its price cap with a new floating mechanism set at 15% below the 22-week average. Ukrainian drone strikes had damaged refineries throughout 2025.
Every week the Strait of Hormuz stays disrupted, the pressure that these measures have spent years building is weakened by rising global prices driven by the Gulf conflict.
