Oil prices surged nearly 5% on Thursday after President Donald Trump announced sweeping new sanctions on Russia's largest oil producers, Rosneft and Lukoil, a move that immediately rattled energy markets and lifted global stock indices tied to the sector.
Brent crude futures rose $2.98, or 4.8%, to $65.57 a barrel by midday in London, while U.S. West Texas Intermediate gained 5.2% to $61.51. The sharp rally-Brent's biggest two-day climb since July-followed Washington's decision to freeze all U.S.-based assets of the two companies and bar American entities from doing business with them.
The sanctions, which also threaten penalties against foreign financial institutions that facilitate Russian oil transactions, target what Trump described as "very big ones that are against their two big oil companies." Speaking from the Oval Office, the president said he hoped the measures would not last long, adding: "We hope that the war will be settled." He said he had also cancelled a planned summit with Russian President Vladimir Putin, explaining, "It didn't feel right to me. It didn't feel like we were going to get to the place we have to get, so I cancelled it."
The new restrictions mark Trump's first direct sanctions on Moscow since returning to office in January and coincide with a broader transatlantic effort to tighten economic pressure on the Kremlin. The European Union on Thursday approved its 19th sanctions package against Russia, which includes a ban on imports of Russian liquefied natural gas. British authorities imposed similar penalties last week.
The coordinated actions sent ripples through financial markets. The FTSE 100 index hit a record high of 9,579.07, driven by a 3% rally in oil majors Shell and BP. Brent futures shifted into backwardation, with near-term contracts trading roughly $2 above six-month deliveries-an indicator of tightening supply expectations.
Energy analysts said the full market impact will hinge on how Asian refiners respond. India, which has become the largest buyer of discounted Russian crude since the 2022 invasion of Ukraine, is already preparing to scale back imports. Two sources familiar with Reliance Industries' operations told Reuters that the private refiner plans to reduce or halt purchases entirely to avoid exposure to secondary sanctions.
"The U.S. sanctions mean refineries in China and India, major buyers of Russian oil, will need to seek alternative suppliers to avoid exclusion from the Western banking system," Saxo Bank analyst Ole Hansen said.
Rystad Energy's Claudio Galimberti noted that previous rounds of sanctions "have mostly failed to dent either the volumes produced by the country or the oil revenues." But Jorge León, head of geopolitical analysis at Rystad, called the latest U.S. move "a significant and unprecedented escalation," warning that it could lead to "major disruptions" if Indian refiners sharply curtail purchases.
U.S. Treasury Secretary Scott Bessent said the administration was "prepared to take further action if necessary to support President Trump's effort to end yet another war." He urged American allies to "adhere to these sanctions" and maintain pressure on Moscow.
Oil markets were further supported by U.S. inventory data showing unexpected declines in crude, gasoline, and distillate stockpiles last week, signaling stronger domestic demand. Despite the surge, analysts said oversupply risks tied to OPEC+ production increases could limit further price gains, with UBS projecting Brent to trade between $60 and $70 in the near term.
