TESTIMONY: When the USA-Iran Deal Crashes Oil Prices — and Bleeds Russia's War Finances

The March peak and the June descent

In March 2026, global oil prices experienced their largest disruption in years. Iran had effectively blocked the Strait of Hormuz in retaliation for US-Israeli military strikes. Roughly one-fifth of global oil and gas supplies normally transit through this narrow passage. The blockage triggered a price spike. Russian Ural crude peaked at approximately $120 per barrel at the height of the crisis. For Moscow, these exceptionally high prices represented a temporary windfall — billions in additional revenues to fund a war whose budgetary costs kept rising.

Then came the deal. Anticipation of a finalized agreement between the United States and Iran — the one formally concluded on June 17, 2026 — and the restoration of normal maritime traffic through the Strait of Hormuz triggered a sharp drop in energy prices. Ural crude fell below $65 per barrel. In a matter of months, Russia's extraordinary oil windfall had evaporated — replaced by a price well below the breakeven threshold Russia's war budget needs to balance its accounts.

The American waiver expired for the third time

The same week, on June 17, 2026, a temporary US sanctions waiver on Russian oil expired for the third time. The waiver had been issued in March, at the peak of the Iran crisis, for a 30-day period to ease what was then the largest disruption in recent energy market history. It authorized the maritime sale and delivery of Russian crude oil. It was then extended in April, then in May. On June 17, President Trump signaled it would not be renewed: "oil is flowing" through the Strait of Hormuz, making the waiver unnecessary.

For Russia, the combination of these two factors — the return of Iranian oil to world markets and the expiration of the American waiver — is structurally bad news. It faces significantly lower oil prices than at the peak, with reinforced sanctions, at the precise moment when its military spending reaches 46% of its federal budget.

I watched the oil markets in March with a certain unease: every additional dollar per barrel was an additional dollar for Putin's war finances. The fall from $120 to $65 is the market telling Russia what sanctions did not fully say: the era of easy oil money is over.

One-fifth of the world's oil through a narrow passage

The Strait of Hormuz is one of the most critical geopolitical chokepoints in the global economy. Between 20 and 21 million barrels per day normally transit through this passage just 54 kilometers wide at its narrowest point, connecting the Persian Gulf to the Gulf of Oman. That flow represents roughly one-fifth of all oil and gas traded in the world. When Iran closed it in March, the entire global economy held its breath.

This geographic dependency has a direct consequence: global oil prices are partly hostage to Gulf geopolitics. And Gulf geopolitics is inextricably linked to Iranian policy, itself linked to the relationship between Tehran and Washington. Which means the USA-Iran deal of June 2026 is not merely a bilateral matter — it is an event that restructures the finances of every actor depending on oil revenues, including Russia.

The interconnection of crises — Iran, Russia, Ukraine

The Strait of Hormuz crisis of March 2026 and its resolution in June illustrate the deep interconnection of contemporary geopolitical crises. The US-Israeli strikes against Iran, the strait closure, the oil price spike, the American waiver on Russian oil, then the deal and the price drop — every event had direct repercussions on Moscow's finances. This causal chain is not visible in standard analyses of the Ukrainian war, but it is one of its most important dimensions.

The United States' European allies had criticized the American waiver on Russian oil, arguing it provided a financial advantage to Russia during its war against Ukraine. That criticism was valid — the waiver kept Russian oil available on Asian markets for three months. Its expiration now coincides with a price environment far less favorable to Moscow.

European allies are right to scrutinize every American decision on Russian sanctions. It is the Europeans who pay the political and security price of the war — they are right to demand maximum consistency on economic pressure. The waiver was a situational necessity. Its expiration is a welcome correction.

The vice: spending rising, revenues falling

The combination of falling oil prices and the expiration of the American waiver compounds the budget pressures the ISW documented for Q1 2026: 46% of the federal budget going to the military, stagnating budget revenues, Russian regions running record deficits. Russia is caught in a vice: its war costs are rising precisely as its main revenue sources — oil and gas — are contracting.

This pressure is not immediately fatal. Russia still holds reserves in its National Wealth Fund, though these have been significantly depleted since 2022. It can sustain high military spending for several more months, or even years, according to economists' estimates. But every month at $65 rather than $120 a barrel reduces that margin — and accelerates the point at which budget constraints begin to affect military capabilities.

Ukrainian refinery strikes also hit the chain

On top of price pressure comes the pressure from Ukrainian strikes on Russian refineries. Data from June 2026 indicates those strikes reduced Russian refining capacity by roughly 25%. Less refined oil means less fuel available for the armed forces, fewer exportable petroleum products, and additional export revenues compressed. This is pressure accumulating on the same point of vulnerability as falling prices: Russia's oil finances.

These two vectors of economic pressure — low international prices and refining capacity reduced by strikes — operate in synergy. They do not cancel each other out. They amplify each other. Russia is producing less refined oil, and what it produces sells for less. That is the maximum compression of oil revenues at a moment of maximum war budget need.

Economists following Russia since 2022 have often said sanctions were not sufficient. They were right. But the combination of sanctions plus price drop plus Ukrainian strikes on refineries is starting to sketch something more constraining. Not an immediate catastrophe — but a cumulative erosion that is hard to stop.

Economies that needed Russian oil

The Trump administration maintained the waiver for three months under pressure from vulnerable Asian economies that feared domestic fuel crises in case of a sudden disruption to Russian oil supplies. That pressure was real: several Southeast Asian countries, plus India and other importers, had significantly increased their purchases of discounted Russian oil since 2022. A sudden rupture in that supply would have created economic strains in countries allied with or important to US foreign policy.

The expiration of the waiver on June 17, 2026, coinciding with the restoration of flow through the Strait of Hormuz, resolves this American foreign policy dilemma: Asian economies can now re-supply with Iranian oil, Gulf oil, and American oil. Dependence on discounted Russian oil is declining — which reduces the political case for maintaining the waiver.

Trump and sanctions — an unstable balance

Donald Trump told the G7 that his administration was now "in a position" to let the waiver expire because "oil is flowing" through the Strait of Hormuz. This formulation is pragmatic: this is not an ideological tightening of pressure on Russia but a decision driven by market context. This Trumpian pragmatism cuts both ways: if tomorrow oil markets suffer another disruption, another waiver could be considered, regardless of implications for the Ukrainian war.

That is why Ukraine's European allies cannot simply rely on the American decision of June 2026. They must maintain constant diplomatic pressure to ensure American decisions on Russian sanctions are guided not only by oil markets but also by their strategic implications for the ongoing war.

Trump does the right things for the wrong reasons — and sometimes wrong things for the right reasons. The expiration of the Russian waiver is a good decision. But it is driven by markets, not by a doctrine of support for Ukraine. That distinction matters, because it defines the durability of this decision.

A substantial shortfall

The difference between a barrel at $120 and a barrel at $65 represents, for a producer of Russia's scale, tens of billions of dollars in missing revenues per year. Russia exports roughly 7 to 8 million barrels per day depending on the period and sanctions regime. At the observed price difference — $55 per barrel — that is theoretically several billion dollars of weekly losses compared to the March 2026 peak.

These losses are not immediately visible in Putin's military decisions. The Kremlin has shock-absorbing mechanisms — National Wealth Fund reserves, state bank credit lines, the ability to defer certain civilian expenditures. But every month at low prices is a month when reserves erode further and budget choices become more constrained.

The sustainability horizon is shortening

Economists studying Russia's war economy before the USA-Iran deal estimated that Russia could sustain high military spending for another one to three years, depending on oil market conditions. The price drop from March to June 2026 shortened that horizon. If prices stabilize around $65 — as markets anticipate — the financial sustainability horizon of Russia's military machine is shorter than it was at the start of the year.

This is not an immediate collapse. But it is a structurally favorable evolution for Ukraine — provided that Kyiv's allies maintain their support long enough for this cumulative economic pressure to translate into real military constraints for Russia.

The economic war against Russia is won slowly, almost invisibly. $120 a barrel in March, $65 in June. That is $55 less windfall for every exported barrel. Multiplied by millions of barrels per day, that is the bill accumulating. Not spectacular. Cumulatively decisive.

The Russian crude price cap and its limits

The G7 established in 2022 a Russian crude price cap at $60 per barrel for transactions using Western financial and logistics services. This cap was designed to keep Russian oil flowing to global markets while limiting Moscow's revenues. Its effectiveness has been mixed: many transactions go through ghost fleets and intermediaries that circumvent the cap. Russia has succeeded in selling much of its oil above the cap through these alternative channels.

Strengthening the cap — either by lowering it, closing evasion gaps, or sanctioning intermediaries facilitating above-cap transactions — would be the next logical step in the economic war against Russia's war finances. The Biden administration had hesitated. The Trump administration has not yet signaled a clear position. This is a decision that Europe's allies must actively push.

Opportunities opened by the USA-Iran deal

Paradoxically, the USA-Iran deal that lowered oil prices also creates a strategic opportunity: now that global supply is better guaranteed by the restoration of flow through the Strait of Hormuz, Ukraine's allies have fewer excuses to avoid tightening pressure on Russian oil. The argument that hardening sanctions on Russian oil would cause global shortages is less compelling when Iranian oil is back on the market.

This is a strategic moment to seize. Every additional month without a stronger cap is another month in which Russia can partially compensate for the price drop through additional volumes or alternative channels. The window of opportunity opened by the USA-Iran deal must be exploited quickly.

The USA-Iran deal is bad news for Putin in the short term — low prices, reinforced pressure. But it is not because the deal targets Russia. It is a side effect of a decision about Iran. What Ukraine's allies must do is turn that side effect into deliberate strategy.

Tankers operating in the shadows

Since 2022, Russia has built a ghost fleet of tankers operating outside Western insurance circuits to circumvent sanctions and the price cap. These vessels — estimated in the hundreds — carry Russian oil to India, China, and other Asian markets without going through Western banks or insurers. This is one of the main reasons the G7's $60 per barrel cap has not been sufficient to significantly compress Russian revenues.

These fleets function because certain states — including nominal adherents to the sanctions regime — turn a blind eye to transactions. The United Kingdom, the European Union, and the United States have taken steps to identify and sanction these vessels, but the pace of sanctions is slower than Russia's rate of acquiring new tankers. It is a race between sanctions pressure and Russian adaptation capacity.

Falling prices also reduce the viability of ghost fleets

Paradoxically, falling oil prices create additional pressure on the economic viability of Russia's ghost fleets. These evasion operations cost more than normal circuits: pricier alternative insurance, geographic detours, intermediary commissions. When Russian crude sold at $120, these extra costs were absorbable. At $65, they are beginning to significantly erode the real margin per exported barrel.

This is not a collapse of the ghost system, but it is a reduction in its profitability for Russia. Every pressure mechanism — low prices, sanctions, strikes — makes alternatives slightly less attractive. It is this accumulation of slight pressures that constitutes the real economic strategy against Moscow.

Russia's ghost fleet is the symbol of all the difficulty of economic warfare: every rule has its workaround, every sanction has its loophole. But low prices make even the workarounds less profitable. That is a virtuous circle for Ukraine — provided prices stay low long enough.

A war economy beginning to weigh on the population

Pressures on Russia's war finances do not stay at the level of budget spreadsheets. They are beginning to percolate into the real economy. Russian inflation exceeded 10% in early 2026, fed by budget deficits and partial debt monetization. Russian interest rates are at historically high levels — the Russian Central Bank's response to control inflation, at the cost of cooling economic activity. Investment in civilian sectors is falling. Russian regions are accumulating deficits.

This economic pressure is not triggering visible rebellion. Putin's Russia has a repressive apparatus capable of suppressing public expressions of discontent. But an economy under stress creates diffuse social tensions — less voluntary mobilization, more silent desertion, a war fatigue setting in among the segments of the population absorbing the real costs of the conflict.

Time as Ukraine's strategic ally

If economic pressures are maintained, the time factor progressively becomes an ally of Ukraine. Not because Russia will collapse tomorrow — it will not. But because every month of budget constraints, inflation, unsustainable military spending, and compressed oil revenues slightly erodes Russia's capacity to maintain war intensity at the same level. This is not a three-month war. It is a war of economic attrition as much as military attrition.

And in an attrition war, what counts is allied consistency. The United States, the European Union, the United Kingdom must maintain pressure even when headlines are busy with other things. Ukraine needs that constancy more than anything else.

Putin bet that the West would tire before Russia did. Two years into sanctions, Russian inflation is at 10%, the military budget at 46% of federal spending, and oil at $65. That is not defeat — but it is erosion. And erosion, over time, is what wins long wars.

Cumulative pressure is starting to matter

The fall of Russian crude from $120 to $65, the expiration of the American waiver, the Ukrainian strikes on refineries that reduced capacity by 25% — all together, these sketch a growing economic pressure on Russia's war finances. This is not a collapse. It is a progressive erosion that, if sustained, will ultimately restrict Putin's military choices.

Ukraine needs this pressure to be maintained and intensified. Its allies have the tools to do so: maintain sanctions, tighten the Russian crude cap, support Ukrainian strikes on Russian economic infrastructure, and resist bypass pressures. This is not a spectacular economic war. It is a war of patience and consistency. And that is precisely where democracies have historically had the most difficulty holding firm.

What allies must retain

The message of this economic moment is simple: conditions are starting to tilt slightly more favorably for Ukraine in the financial dimension of the war. Russian oil prices are low. The American waiver has expired. Russian refineries are damaged. This is the moment to not ease pressure — but intensify it. Every concession made now on sanctions, every hesitation on long-range strikes, every delay in weapons deliveries will translate directly into additional revenues and additional military capabilities for Moscow.

The economic war against Russia is won in ISW spreadsheets, in Ural crude prices, in Russian refining capacity. Not always in newspaper headlines. But those numbers matter as much as front lines.

The economic war against Russia makes no headlines. No drone footage, no filmable explosions. Just price charts, budget lines, reserves eroding. But it is there, in those quiet numbers, that the final outcome of this war may be decided.

By Maxime Marquette, columnist

Editorial stance

I am not a journalist but a columnist and analyst. My expertise lies in observing and analysing the geopolitical, economic and strategic dynamics that shape our world. My work is to take political strategies apart, to understand global economic movements, to put the decisions of international actors in context and to offer analytical perspectives on the changes that are redefining our societies.

I do not claim the cold objectivity of traditional journalism, which stops at reporting facts. I claim analytical clarity, rigorous interpretation and a deep understanding of the complex issues that concern us all. My role is to give meaning to the facts, to place them in their historical and strategic context, and to offer a critical reading of events.

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