U.S.-Iran war squeezes oil supply; Russia and India emerge as clear winners
Military strikes by the United States and Israel on Iran on Feb. 28 set off an energy shock that has rapidly reshaped global markets. Iran responded by blocking the Strait of Hormuz, halting roughly 20 million barrels per day that typically pass through the chokepoint. Three weeks later, on March 23, International Energy Agency (IEA) Executive Director Fatih Birol told the National Press Club in Australia that the conflict has removed about 11 million barrels per day from global oil supply.
Birol said the scale surpasses the combined supply disruptions seen during the 1973 oil embargo and the 1979 Iranian Revolution. In the Middle East, nine countries have reported damage of varying severity across more than 40 energy infrastructure sites. The IEA also estimates global natural gas supply losses at 140 billion cubic meters, nearly double the 75 billion cubic meters Europe lost during the Russia-Ukraine conflict.
The supply hit is only part of the story. The price shock is also creating obvious beneficiaries.
Putin's unexpected windfall
Before the Iran war, Russia's Urals crude traded below $60 per barrel, pinned there for nearly three years under Western sanctions. After the outbreak of the war in Ukraine, a U.S.-European price cap helped keep Urals at a $30 to $40 discount to Brent, a spread widely cited as evidence the sanctions were biting.
That dynamic shifted after the Hormuz blockade widened the gap between global demand and available supply. Data from the Center for Research on Energy and Clean Air (CREA) show Russia's total fossil fuel export revenue in the first two weeks of March climbed to €7.7 billion, or €513 million per day, up 8.7% from €472 million per day in February. Oil exports averaged €372 million per day, adding €672 million (about $777 million) in extra earnings over the two-week period.
Urals rose from under $60 to around $90 within three weeks, a jump of nearly 80%. Al Jazeera cited energy analyst George Voloshin as noting Brent also increased, from roughly $65 to above $110, but the key change was in the spread. The Urals discount to Brent compressed sharply from around $40 pre-war. The Moscow Times reported on March 16 that Urals delivered to India briefly traded at a premium to Brent, a first since sanctions were imposed.
Policy moves added to the volatility. On March 12, the Trump administration announced a 30-day sanctions waiver allowing countries to buy Russian oil in transit. Treasury Secretary Scott Bessent said the step would free about 140 million barrels of supply, though analysts say the condition that purchases provide "no significant financial benefit" to Russia is effectively unenforceable. Separately, the IEA announced a release of 400 million barrels from strategic petroleum reserves, the largest drawdown on record. The waiver expires April 11, leaving markets braced for another turn in uncertainty.
India steps to the fore
India has been the most direct beneficiary on the buying side. CREA estimates India purchased €1.3 billion of Russian fossil fuels in the first two weeks of March, or €89 million per day, up 48% from €60 million per day in February. Al Jazeera reported at least seven tankers originally bound for China diverted to India mid-voyage; one vessel, the Aqua Titan, arrived at an Indian port on March 21. As benchmark prices rise, the Moscow-New Delhi oil trade is accelerating.
Who pays
The cost ultimately lands with consumers, and U.S. households are feeling it first. AAA data show the national average gasoline price rose 33%, from $2.98 before the conflict to $3.96 on March 23. California averaged $5.56, while Kansas was lowest at $3.23. Average diesel hit $5.07, the highest since 2022. Fortune reported the spike has effectively wiped out the impact of recent tax rebates for many U.S. households.
Aviation has been among the earliest sectors hit. Platts assessment data show U.S. jet fuel prices rose more than 60% in three weeks, doubling in some regions. United Airlines became the first major U.S. carrier to formally announce capacity cuts. In an internal memo, CEO Scott Kirby said the airline is preparing for oil at $175 per barrel, a scenario that would lift annual fuel costs by about $11 billion, more than double the profit from the company's best year. United plans to cut capacity by 5% in the third and fourth quarters.
The spillover is global. CNBC reported on March 21 that Delta Air Lines also warned it may reduce capacity. Euronews said Qantas, Scandinavian Airlines and Thai Airways have raised prices, while Air New Zealand has canceled more than 1,000 flights.
The ripple even reaches the gig economy. The Philadelphia Inquirer reported on March 23 that DoorDash began offering drivers weekly fuel subsidies of $5 to $15 and 10% cash back on gasoline purchases, responding to drivers cutting back as fuel costs rise.
Three weeks into the Iran war, the world is short 11 million barrels of oil per day; Russia has collected nearly $800 million more in about 15 days; U.S. consumers are paying roughly one-third more at the pump. With the sanctions waiver set to expire on April 11, the transmission chain looks far from finished.
