Three Weeks into the U.S.-Iran War: Who's Profiting and Who's Paying?
- Core Viewpoint: The U.S.-Iran military conflict has led to the blockade of the Strait of Hormuz, triggering a global energy supply crisis. The resulting daily oil supply loss has already exceeded the total losses from the two oil crises of the 1970s. It has unexpectedly weakened the effectiveness of sanctions against Russia while passing the costs on to global consumers and multiple industries.
- Key Elements:
- The conflict has caused a global daily oil supply loss of 11 million barrels, exceeding the combined losses from the 1973 oil embargo and the 1979 Iranian Revolution. Natural gas supply losses have reached 140 billion cubic meters.
- Russia has become a primary beneficiary. The price of Urals crude rose from $60 to around $90 within three weeks, with its discount to Brent crude narrowing significantly. Russia's oil exports earned an additional approximately $777 million in the first two weeks of March.
- India has accelerated its purchases of Russian energy. In the first two weeks of March, its average daily import value reached 89 million euros, a 48% increase from February. Some oil tankers originally destined for China have been rerouted to India.
- U.S. consumers are directly bearing the brunt of rising oil prices. The national average gasoline price rose 33% in three weeks to $3.96 per gallon, with diesel prices reaching their highest levels since 2022.
- The aviation industry is severely impacted. U.S. jet fuel prices have surged over 60%. Airlines like United Airlines have announced capacity cuts and warned of soaring costs.
- The shock has spread to the gig economy. Food delivery platform DoorDash has begun issuing fuel price subsidies to drivers in response to a decrease in order acceptance, indicating the widespread nature of the impact chain.
On February 28th, the United States and Israel launched a military strike against Iran. Iran subsequently blockaded the Strait of Hormuz, cutting off the daily transit of 20 million barrels of oil. Three weeks later, on March 23rd, IEA Executive Director Fatih Birol gave a figure at the National Press Club of Australia: the global daily oil supply loss caused by this war is 11 million barrels.
This figure exceeds the combined losses of the 1973 oil embargo and the 1979 Iranian Revolution crises.
Energy infrastructure at over 40 sites across 9 Middle Eastern countries suffered varying degrees of damage. Concurrent IEA data shows that global natural gas supply losses reached 140 billion cubic meters, nearly double the European gas losses (75 billion cubic meters) during the Russia-Ukraine conflict. In three weeks, the quantitative impact of this conflict on the energy market has surpassed the entirety of the 1970s.
But supply loss is only half the story. The other half is that this crisis has clear beneficiaries.
Putin's Windfall
Before the Iran war began, Urals crude traded at less than $60 per barrel. This price had been locked in for nearly three years, a direct result of Western sanctions. Following the outbreak of the Russia-Ukraine war, Europe and the US imposed a price cap on Russian oil, maintaining a long-term discount of $30 to $40 between Urals crude and the international benchmark Brent. This discount was the most直观 signal that sanctions were working.
The Iran war changed all that. After the Strait of Hormuz blockade, a huge gap appeared in the global oil market, forcing buyers to seek alternative supplies. According to data from the Centre for Research on Energy and Clean Air (CREA), Russia's total fossil fuel export revenue reached €7.7 billion in the first two weeks of March, averaging €513 million per day, an 8.7% increase from February's €472 million daily average. Daily oil export revenue averaged €372 million, earning an extra €672 million (approximately $777 million) over the two weeks.
Urals crude rose from under $60 to around $90 within three weeks, a gain of nearly 80%. According to Al Jazeera, energy analyst George Voloshin pointed out that Brent also rose from around $65 to over $110 during the same period, but the key is not the absolute price, but the spread between the two. The discount of Urals to Brent narrowed significantly from around $40 pre-war. The Moscow Times reported on March 16th that Urals crude delivered to India briefly traded at a premium to Brent, something that had not happened since the sanctions took effect.
In other words, a significant portion of the economic wall built by the West through three years of sanctions was dismantled by three weeks of war in Iran.
The Trump administration announced a 30-day sanctions waiver on March 12th, allowing countries to purchase Russian oil already in transit, with Treasury Secretary Scott Bessent stating this would release about 140 million barrels of supply. However, analysts widely believe the waiver's condition of "not providing significant financial benefit" is almost unenforceable. Meanwhile, the IEA announced the release of 400 million barrels from strategic petroleum reserves, the largest such release in history. This waiver is set to expire on April 11th, at which point the market will face a new round of uncertainty.
India is the most direct actor. CREA data shows that India's purchases of Russian fossil fuels totaled €1.3 billion in the first two weeks of March, averaging €89 million per day, a 48% increase from February's daily average of €60 million. Al Jazeera confirmed that at least seven oil tankers originally bound for China were rerouted to India mid-voyage, with one ship named Aqua Titan arriving at an Indian port on March 21st. While the world worries about oil prices, oil trade between Moscow and New Delhi is accelerating.
Who's Paying?
Both the losses on the supply side and the gains on the beneficiary side ultimately get passed on to consumers. American consumers are bearing the most direct brunt.
AAA data shows the US national average price for gasoline rose from $2.98 pre-war to $3.96 on March 23rd, a 33% increase. The average price in California reached $5.56, while the lowest, in Kansas, was $3.23. The average diesel price hit $5.07, the highest since 2022.
Fortune reported that this round of oil price increases has effectively swallowed up the tax refunds American families just received.
The aviation industry is among the first to feel the impact. Platts assessment data shows US jet fuel prices rose over 60% in three weeks, doubling in some regions. United Airlines became the first major US airline to officially announce capacity cuts. CEO Scott Kirby stated in an internal memo that the company is preparing for oil prices to reach $175 per barrel, which would mean an annual fuel cost increase of about $11 billion, more than double the company's profit in its "best year ever." United will cut 5% of its flights in the second and third quarters.
The effects are spreading globally. According to a CNBC report on March 21st, Delta Air Lines also warned of potential capacity reductions. Euronews reports show that Qantas, SAS, and Thai Airways have already raised prices, and Air New Zealand has canceled over 1,000 flights.
Even the gig economy is being affected. According to a Philadelphia Inquirer report on March 23rd, DoorDash has begun offering drivers a weekly fuel subsidy of $5 to $15 and a 10% cashback on gas to address drivers reducing their orders due to rising fuel costs. When a food delivery platform has to pay for a Middle Eastern war, the length of the impact transmission chain needs no further explanation.
Three weeks into the Iran war, the world loses 11 million barrels of oil daily, Russia earns nearly $800 million extra in 15 days, American consumers pay one-third more for fuel, and this transmission chain will continue to lengthen after the sanctions waiver expires on April 11th.
