The armed conflict in the Middle East may lead to shifts in the balance of supply and demand in the global oil and gas markets, creating conditions for the redirection of Russian energy supplies. This was stated by Russian President Vladimir Putin during a meeting on the global oil and gas market situation on March 9.

The meeting was preceded by a sharp rise in global oil and gas prices. The cost of May futures for Brent crude oil during trading on March 9 surpassed $115 per barrel for the first time since late June 2022, reaching $118.7 per barrel, according to data from the ICE exchange. By 20:45 Moscow time, the price corrected to $99.5 per barrel. The price of April gas futures at the TTF hub in the Netherlands exceeded $800 per 1,000 cubic meters for the first time since mid-January 2023, reaching $824, before correcting to $671 per 1,000 cubic meters. For comparison, on March 6, the price of oil was $92.7 per barrel, and gas was $641 per 1,000 cubic meters, while on February 27 (before the start of the armed conflict between the U.S. and Israel with Iran) it was $72.9 per barrel and $390 per 1,000 cubic meters respectively.

The rise in oil prices accelerated after reports of production cuts in Kuwait due to overflowing storage facilities. Another driver was the forecast from Qatar's energy minister, who suggested a potential halt in production across all Gulf Cooperation Council countries. The increase in gas prices was spurred by a March 2 announcement from QatarEnergy regarding the suspension of liquefied natural gas (LNG) production in Qatar. The actual halt of shipping traffic in the Strait of Hormuz, which connects the Persian Gulf with the Gulf of Oman in the Indian Ocean, led to a surge in tanker freight rates in the Middle East to record levels, as reported by Vedomosti on March 4.

During the meeting, Putin noted that current high commodity prices are temporary. However, global logistics for supplies in the context of the ongoing conflict in the Middle East will change in favor of more lucrative and promising markets, and the changes in the balance of supply and demand for hydrocarbons triggered by the current situation will lead to a new sustainable pricing reality, he emphasized.

According to Putin, logistical challenges in hydrocarbon transportation routes "negatively impact" production chains and the entire system of international economic relations. Disruptions in supplies lead to economic challenges, rising inflation, and decreasing industrial production, the president explained.

He noted that in 2025, about one-third of the global maritime oil exports transited through the Strait of Hormuz – approximately 14 million barrels per day, with around 80% heading to Asia-Pacific countries. However, the complete reorientation of Middle Eastern oil supplies without using the Strait of Hormuz is impossible, the president stated. Changing logistics will require significant investments in infrastructure, expanding maritime terminals, and will carry high political risks, Putin clarified.

A similar situation is arising in the global gas market, according to him: LNG supplies from the Middle East have sharply declined, and it is not possible to quickly compensate for the lost volumes.

The president pointed out that the global oil and gas market is shaping up in such a way that a rapid reorientation of exports to markets that require increased supply could allow Russia to establish a foothold there. These are countries with stable long-term demand and "reliable long-term relationships," Putin remarked.

He reminded that Russia is a reliable supplier of energy resources and will continue to supply oil and gas to countries that are reliable counterparties. This includes not only Asia-Pacific countries but also Eastern European countries such as Slovakia and Hungary, he explained. At the same time, the European Union plans to cease energy purchases by 2027, he reminded. In this regard, the government has been tasked with assessing the feasibility and rationale for ceasing energy resource supplies to the European market, redirecting these volumes to "more interesting directions," and securing a foothold in those markets, he emphasized. The president did not rule out that Russia would supply oil and gas to Europe if it receives signals of readiness to abandon the political context in this area.

The ongoing rise in oil and gas prices is largely attributed to the reassessment of risks by insurance companies, which have effectively refused to cover force majeure situations during transit through the Strait of Hormuz, according to Sergey Tereshkin, CEO of Open Oil Market. Additionally, the price surge has been intensified by attacks on oil and gas facilities, noted Maxim Shaposhnikov, an advisor to the manager of the "Industrial Code" fund, and Igor Yushkov, an expert at the Financial University under the government.

In the coming days, the price of Brent crude is expected to remain around $100 per barrel, experts believe. In the moment, quotations may briefly rise to $150 per barrel, but these will be temporary spikes, Shaposhnikov notes. Yushkov agrees with this outlook. Subsequently, the price may decrease to $80-85 per barrel, Shaposhnikov adds.

For more details, read: Vedomosti