The conflict between Iran and Israel could benefit the Russian economy: what will happen to oil and the ruble

A war in the Middle East could provoke a global recession and a reduction in exports from our country

Back in November 2023, Bloomberg predicted an increase in oil prices to $150 per barrel and a global recession in the event of a war between Israel and Iran. And now the conflict in the Middle East has become a fact. How will it turn out for the Russian budget and for the ruble exchange rate?

While military experts debate whether targeted strikes will escalate into a full-scale conflict in the Middle East, financiers are trying to predict the consequences of such actions at the global level. This is not the first time that forecasts have been made in this regard over the past six months. For example, back in October, Bloomberg analysts warned that if the conflict between Israel and Hamas escalates into a full-scale war with Iran, oil prices will soar to $150 per barrel, and the world economy will slide into recession. All this will lead to a reduction in global output by $1 trillion, and global inflation will jump to 6.7%. This scenario is not beneficial to Iran itself, first of all, so Tehran will try to avoid intensifying the confrontation. However, the reality turned out to be more complicated than analysts’ expectations.

It is curious that Western financiers often name Russia among the winning parties in this conflict, because our state’s budget benefits from high energy prices, and previously, an increase in the cost of a barrel has always strengthened the ruble. However, the experts interviewed by MK disagreed on whether a major war in the Middle East would bring profit to our country. Thus, according to BitRiver Communications Director, economist Andrei Loboda, the price of Brent oil is already ready to go to the nearest target of $95 per barrel, and the Iran-Israeli conflict can only help it with this. By the end of spring, if the confrontation drags on, you could see $100 per barrel or higher, and if it resolves quickly, the price of oil will still fluctuate between $80-90 per barrel, since the geopolitical situation in the Middle East will not stabilize soon in any case . High oil prices are, of course, beneficial for the Russian budget. If the Brent price reaches $100, then a barrel of Urals will cost at least $85, and budget revenues will exceed planned levels. But one should hardly expect a direct impact of this conflict on the ruble. Gone are the days when the national currency carefully followed the dynamics of oil. The impact on the ruble may be indirect, through the growth of budget revenues. But, most likely, high oil prices will only be able to prevent the collapse of the ruble to 100 per dollar, which is possible if the requirement for the mandatory sale of foreign currency earnings by exporters is canceled after April 30. By the end of spring, Russians will see the dollar in the range of 90-96 rubles, the euro in the range of 98-104 rubles, the yuan in the range of 12.6-13.3 rubles, the expert believes.

The situation with resource prices will depend on the duration and scale of the Iran-Israeli conflict. With the escalation of armed confrontation, especially with the involvement of other countries in this conflict, we can expect an increase in the price of oil, but not to $100. “Quotes may rise to the highs of 2022-2023, up to $97-99 per barrel,” explains Mark Goikhman, an analyst at the Capital Skills Financial Academy. “If they stabilize after a surge in tension, prices could move back to $85.” According to Alexander Razuvaev, a member of the supervisory board of the Guild of Financial Analysts and Risk Managers, so far all price fluctuations are the game of speculators. If there is a serious war, and many believe that it is inevitable, then this is a plus for Russia: oil will rise in price. Perhaps Europe will buy it directly, that is, it will lift sanctions. Gold, and there is a lot of it in the reserves of the Central Bank of the Russian Federation, will also be more expensive. But so far all these events are neutral for the ruble and shares, the expert is sure.

“If the price of oil jumps above $100 per barrel, then global economic growth will immediately slow down, which will immediately affect Russian budget revenues,” Nikita Maslennikov, a leading expert at the Center for Political Technologies, enters into the debate. Yes, prices will be high, but everyone will simply buy less oil and the state treasury will not be able to benefit from this. In addition, Russia’s economic interaction with both Israel and Iran will decrease, which will also not be positive for the budget, the expert is sure.