Who Really Benefits From the Iran Conflict? Follow the Oil
- Higher oil prices boost revenues for Russia, sanctions relief increases exports, and diverted U.S. attention weakens support for Ukraine.
- Massive weapons use in Iran depletes stockpiles, limiting military aid available to Europe and Ukraine while exposing weaknesses in U.S. defense systems.
- Threats to the Strait of Hormuz and other routes raise prices and push countries to secure alternative supplies, benefiting rival powers like Russia and China.
Whilst most people will have seen the virtue of stopping Iran from ever developing nuclear weapons, many may now regard U.S. President Donald Trump’s plan to achieve this as being in the same vein as the famous business plan of the South Park gnomes to ‘make profit by stealing underpants’. This ran as follows -- ‘Phase 1: Collect underpants, Phase 2: ?, Phase 3: Profit’. Trump’s variation seems to have been -- ‘Phase 1: Kill Supreme Leader, Phase 2: ?, Phase 3: Iran never develops nuclear weapons’. Bewilderingly, and not just to those in the energy markets, Trump appears to have ignored the longstanding threat from Iran that in times of severe external attack, it could -- and would -- close the Strait of Hormuz, through which flows up to a third of the world’s oil and about a fifth of its liquefied natural gas (LNG). The often-stated clear aim of this would be to cause oil and gas prices to spike, causing huge economic damage to major energy importers. This plan, in contrast to that of either the gnomes of South Park or President Trump, seems to be working very well. So, who is really benefiting from this ongoing conflict in Iran?
“Putin’ll be laughing his ass off,” as one Washington-based senior source who works closely with the current U.S. administration exclusively put it to OilPrice.com last week. “Just when he thought the game was up in Ukraine, it’s Christmas time again in the Kremlin,” the source added. For a start, with the U.S. having lifted sanctions on Russian oil, industry estimates suggest that Russia is earning up to US$150 million more each week from these exports. India was the quickest to move, buying up to 30 million barrels almost immediately, which amounted to nearly all the available Russian cargoes in Asian waters. It is apposite to note here that Washington had spent the entire duration of Trump’s second term working on every conceivable angle to stop India from continuing to import any Russian oil, on the basis that it was acting as a prime funding mechanism for the Kremlin’s ongoing war in Ukraine. The U.S.’s core long-term ally in the Asia-Pacific region -- Japan -- has also stressed in the last week how important having access to Russian oil is to it, given the growing chaos in the Middle East. “Securing crude oil from overseas, including Russian crude oil, is extremely important for our country’s energy security,” highlighted Japan’s Minister of Economy, Trade and Industry Ryosei Akazawa. Like many countries, Japan has increasingly relied on oil from the Middle East since Russia’s 2022 invasion of Ukraine, to the degree that the region accounted for 94% of its crude oil imports last year, with 93% of that being transported through the Strait of Hormuz. Although the waivers on Russian oil have now been extended to all countries, they are still only valid for 30 days and only apply to oil already at sea. However, as energy prices continue to rise, the odds look increasingly in favour of the term and the scope of supplies covered being extended. Thus may also be the case for the newly-announced -- and perhaps even more extraordinary -- waivers on Iranian oil at sea
That said, it is not just from a big influx of money that Russia is benefiting in its aim of capturing Ukraine. It is also benefiting from the sheer scale of weapons and munitions being used by the U.S. in Iran, which will affect the size and scope of those that can be bought by Europe and then passed on to Ukraine to fight its war against Russia. According to the Washington source, who cited Pentagon numbers, the cost to the U.S. of the war had already spiralled over US$11 billion in the first week, beginning 28 February. As of today, according to the same sources, the cost in weapons and munitions alone (not including adjunct expenses, such as medical costs and replacement military aircraft lost in combat, for example) is over US$18 billion. More importantly for Ukraine, and Europe -- which is braced for further Russian advances westwards if Russia conquers Ukraine -- is specifically what hardware has been expended. This means it will not be available for purchase by Europe under the U.S.’s ‘Foreign Military Sales’ (FMS) programme, by which Europe pays the U.S. government, the U.S. government buys the weapons from U.S. defence companies, and then Europe transfers those weapons to Ukraine.
According to the Washington source and a very senior source inside the European Union’s (E.U.) security complex, the scale and composition of the U.S. weapons that have already been used in Iran is staggering. This includes Tomahawk cruise missiles, each costing around US$3.6 million and slow to replace, a fact that senior U.S. Navy planners have been publicly quoted as saying “will be felt for several years.” Large numbers of Patriot interceptors have also been used to counter Iranian ballistic missiles, despite each round costing millions of dollars and already being in critically short supply for Ukraine. Terminal High Altitude Area Defense (THAAD) interceptors – priced between US$11 million and US$24 million apiece – have been fired heavily as well, with several associated radar systems destroyed by Iranian strikes across the Gulf. Hundreds of air-launched precision-guided munitions have also been used, including Joint Direct Attack Munitions, Joint Air-to-Surface Standoff Missiles, and other high-value strike weapons – precisely the categories Ukraine has been pleading for. All of this represents not just a financial drain but a severe depletion of the very munitions and systems that Europe relies upon to purchase through the FMS programme and transfer to Ukraine.
Another gift for Russia -- and for its own primary backer, China -- is that Washington’s problem is compounded by what the destruction of U.S. hardware in the Gulf actually reveals. For years, the U.S. has reassured its Gulf allies that the enormously expensive systems it sold them — THAAD batteries, Patriot defences, early-warning radars, and fleets of U.S.-made drones — would provide a reliable shield against precisely the kind of missile and drone attacks Iran has now launched. Yet the fact that Iranian strikes have destroyed or disabled the AN/FPS-132 early-warning radar in Qatar, multiple AN/TPY-2 THAAD radars across the region, the AN/TPS-59 radar in Bahrain, and a string of MQ-9 Reapers expose a far more uncomfortable truth: the U.S. cannot adequately defend these states, either directly with its own forces or indirectly through the systems it has sold them. This strikes at the very heart of the security guarantees that underpinned the Trump-championed Abraham Accords that were central to Washington’s wider strategy to counter growing Russian and Chinese influence across the Middle East, as fully analysed in my latest book on the new global oil market order. If U.S. protection turns out to be an illusion, then the incentive for Gulf states to hedge towards Moscow and Beijing only grows stronger — another strategic windfall for Russia at the very moment it is pushing deeper into Ukraine, and for China as it eyes the land across the Taiwan Strait.
As it stands, none of these pressures on the U.S. and its allies looks like they will diminish any time soon -- in fact, they may get worse. The Iranian-backed Houthis have not yet been instructed by Tehran to fully close the other critical energy transport route of the Bab-el-Mandeb Strait, through which flows around 10-15% of the world’s seaborne oil shipments This 16-mile-wide waterway flows between the west coast of Yemen on the one side, and the east coasts initially of Djibouti and then of Eritrea on the other, before it joins the Red Sea. The sea is also the location of Saudi Arabia’s Yanbu oil terminal, which the Kingdom has been using to bypass the Strait of Hormuz to reduce the impact of Iran’s blockade on the Strait of Hormuz. This has seen the Saudis increase oil exports through the East-West pipeline to Yanbu from an average of 1.7 million bpd in 2025 to record daily exports of 5.9 million bpd in March, with plans to increase this to 7 million bpd soon. Given this escalation, and others available to Iran, oil and gas prices could even rise significantly above current disaster-planning scenarios, as thoroughly exclusively analysed by OilPrice.com.
By Simon Watkins for Oilprice.com
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