The Biden administration’s expanded sanctions on Russia’s oil sector have sent crude prices soaring and unsettled global financial markets. The measures, announced on Friday by the US Treasury, target major Russian oil firms and vessels involved in shadow fleet operations, escalating tensions in the ongoing geopolitical conflict.
Targeting Russia’s Oil Firms and Shadow Fleet Operations
The newly imposed sanctions aim to disrupt Russia’s oil revenue streams, which fund its war efforts in Ukraine. Key Russian firms like Gazprom Neft and Surgutneftegas are targeted, alongside 183 vessels linked to Russia’s shadow fleet, which has been used to evade international sanctions.
Treasury Secretary Janet Yellen explained that the sanctions complement the G7+ price cap strategy, with a new ban on US petroleum services for Russian extraction set to take effect in February 2025. These coordinated measures with the UK are designed to weaken Russia’s access to global markets and reduce reliance on risky shipping practices.
Crude Prices Surge Amid Sanction Announcement
The market responded swiftly to the sanction news. West Texas Intermediate (WTI) crude surged 3.5%, reaching $77 per barrel, while Brent crude jumped 2.9%, hitting $79.
In contrast, European stock markets faltered, with the Euro STOXX 50 dropping 0.9%, and the Euro STOXX 600 down 0.6%. Energy-dependent stocks took a hit, including E.ON and Iberdrola, both suffering losses exceeding 4%. Spain’s IBEX 35 saw the largest dip, tumbling 1.4%.
Strong US Employment Data Bolsters Dollar
The US dollar further strengthened in response to strong US employment data. The December nonfarm payrolls report revealed a 256,000 increase in new jobs, significantly surpassing expectations of 160,000. This marked the strongest growth since March 2024, reinforcing investor confidence in the US economy.
As a result, the euro dropped 0.5% to $1.0250, its weakest point since October 2022, while the British pound fell 0.6% to $1.2220, its lowest level since November 2023. The dollar’s rally reflects heightened uncertainty over the broader economic impact of the new sanctions.
