Iran War Drives Russian Crude Prices Wildly Volatile

Russia's crude oil prices for Indian refiners have been highly volatile due to the ongoing Iran war, serving as a barometer of market anxiety. The conflict has led to wild price swings, with discounts initially ranging from $2 a barrel before the conflict but eventually reaching premiums of up to $20 over benchmark Brent at its peak.

When Iran effectively shut the Strait of Hormuz in early March, crude tankers carrying Gulf supplies were stranded in the Persian Gulf, triggering a frantic search for alternative barrels. Russia's ample Russian cargoes, already en route to India via the Indian Ocean, allowed it to meet the demand and command hefty premiums. As a result, Indian refiners paid $12-20 per barrel premium for Russian oil.

However, as supplies from other regions improved and the Iran-US ceasefire was extended, the premium on Russian crude decreased to about $10 a barrel by April. By May, the premium had almost disappeared due to increased supplies from various countries, including Brazil, Venezuela, Saudi Arabia, and the UAE.

The resumption of Iran-US hostilities has once again wiped out discounts on Russian crude, with traders unwilling to offer price concessions amid mounting supply risks. The conflict is also widening, with Iran-backed Houthi rebels in Yemen stepping up attacks on commercial shipping in the Red Sea, disrupting exports from Saudi Arabia.