Global crude prices surged nearly 5% on Thursday following President Donald Trump's announcement of new sanctions targeting Russia's oil industry. The move is intended to pressure President Vladimir Putin to end the war in Ukraine.
Brent crude, the international benchmark, increased by 4.9% to $65.65 a barrel, reaching a two-week high. West Texas Intermediate also saw a significant rise. The sanctions target Russia's two largest oil companies, Rosneft and Lukoil. All assets in the US belonging to these firms are now frozen, and American companies and individuals are barred from conducting business with them.
The US is also threatening secondary sanctions on foreign financial institutions that continue to do business with Rosneft and Lukoil, potentially impacting banks facilitating Russian oil sales in countries like China, India, and Turkey. In anticipation of these measures, some Indian refiners are reportedly preparing to significantly reduce or halt imports of Russian oil. Reliance Industries, a major Indian buyer of Russian crude, is among those considering a complete cessation of imports.
Treasury Secretary Scott Bessent announced the sanctions, stating that they were a response to Moscow's refusal to end its "senseless war" in Ukraine. He added that the Treasury Department is prepared to take further action if necessary to support President Trump's efforts to end the war. The sanctions follow months of bipartisan pressure on President Trump to impose stricter measures on Russia's oil industry.
Trump, speaking to reporters, described the sanctions as "tremendous" and expressed hope that they would be short-lived, leading to a resolution of the war. However, he also acknowledged his frustration with the lack of progress in talks with Putin, stating that discussions "don't go anywhere". The sanctions were announced a day after a planned summit between Trump and Putin in Budapest was called off.
The EU has also unveiled a fresh wave of sanctions against Russia, including a ban on importing liquefied natural gas (LNG) from Russia by 2027. The bloc also blacklisted over 100 more tankers from Moscow's "shadow fleet" of aging oil vessels and imposed controls on the travel of Russian diplomats suspected of espionage.
The jump in oil prices also boosted shares in energy companies such as Shell and BP, which rose by approximately 2.9% in early trading. Major stock markets, however, showed mixed results.
Russia's foreign ministry has warned that the sanctions risk undermining diplomatic efforts to end the war in Ukraine. Meanwhile, Ukraine's ambassador to the United States welcomed the sanctions, stating that they align with Ukraine's position that peace can only be achieved through strength and pressure on the aggressor.
