Richard Parks The Biden administration has escalated sanctions on Russia’s oil sector, intensifying efforts to curb Moscow’s ability to finance its military operations in Ukraine. The move has led to a spike in crude prices and caused significant turbulence in global equity markets.
Sanctions Target Key Oil Firms and Shadow Fleet
On Friday, the US Treasury imposed fresh sanctions targeting Russia’s major oil companies, including Gazprom Neft and Surgutneftegas, alongside 183 vessels linked to Russia’s shadow fleet. This fleet, designed to bypass existing sanctions, has been used to continue transporting oil despite global restrictions.
Treasury Secretary Janet Yellen emphasized that these new measures are part of a broader strategy, aligning with the G7+ price cap initiative. The aim is to significantly hinder Russia’s oil revenue, which is critical for funding its ongoing military operations in Ukraine. An additional ban on US petroleum services supporting Russian extraction is set to take effect in February 2025.
The sanctions were coordinated with the United Kingdom and are intended to reduce Russia’s access to global oil markets and limit reliance on risky shipping practices that evade international restrictions.
Oil Prices Surge, European Markets React
The sanctions sent crude prices soaring. West Texas Intermediate (WTI) crude climbed 3.5% to $77 per barrel, while Brent crude rose 2.9% to $79. The increase in oil prices heightened concerns about tightening global oil supply, triggering a ripple effect in European equity markets.
The Euro STOXX 50 dropped 0.9%, and the Euro STOXX 600 fell 0.6%. Energy-reliant companies, including E.ON and Iberdrola, saw stock losses exceeding 4%, while Spain’s IBEX 35 index dropped 1.4%.
US Employment Data Boosts Dollar
The new sanctions coincided with strong US employment data, which further supported the US dollar. December’s nonfarm payrolls report revealed 256,000 new jobs, significantly exceeding the 160,000 forecast, marking the strongest increase since March 2024.
As a result, the euro weakened by 0.5% to $1.0250, its lowest level since October 2022, while the British pound fell 0.6% to $1.2220, marking a low not seen since November 2023. The strengthening of the dollar underscored investor concerns about the global economic impact of the sanctions and the oil market volatility.