Oil Prices Extend Gains After U.S. Sanctions Russian Oil Giants Lukoil and Rosneft

October 23, 2025: Oil prices climbed further in early Asian trade on Wednesday after U.S. President Donald Trump announced that there would be new sanctions on Russia’s two largest oil producers, Lukoil and Rosneft. This marks the first Ukraine-related sanctions of his second term.

Sanctions Signal Sharp Policy Turn

The sanctions were announced late on Tuesday in Washington. They reflect a rising frustration within the White House over Moscow’s ongoing war in Ukraine. The move follows a 19th package of European Union sanctions that includes a ban on Russian liquefied natural gas (LNG) imports, as well as similar measures from the United Kingdom targeting the same firms last week.

The latest U.S. action has targeted dozens of subsidiaries of Lukoil and Rosneft, freezing their U.S. assets and barring American entities from conducting business with them. Shedding some light on the move and its intended outcome, the U.S. Treasury Secretary Scott Bessent said, “Given President Putin’s refusal to end this senseless war, Treasury is sanctioning Russia’s two largest oil companies that fund the Kremlin’s war machine.”

Crude Prices Surge on Supply Concerns

Once the announcement was made, the prices of crude rose, reflecting supply concerns. Prices of Brent crude rose over $2 to trade near $64 per barrel, while WTI rose to $59.84. The rally in the price came after prices of both benchmarks slipped earlier in the week amid fears of oversupply and sluggish global demand. Oil prices had touched their lowest levels in nearly five months before rebounding sharply once sanctions were announced, signalling renewed market concern about potential supply disruptions.

Washington’s Tougher Stance

The sanctions have marked a significant shift for President Trump, who had previously avoided directly targeting Russian energy firms. Russia has so far enjoyed favourable tariffs and trade measures instead. Though earlier this year, Washington imposed 25% tariffs on Indian goods after New Delhi continued to import discounted Russian crude. However, Chinese buyers remain exempt, even after they account for a major share of Russia’s redirected exports. Since the $60 per barrel price cap was introduced by Western allies in 2022, Russia has increasingly focused on Asian markets, especially with India and China now among its largest customers.

Global Implications and Market Outlook

The sanctions can reshape global oil flows depending on enforcement levels. While the immediate impact supports prices, the medium-term outlook hinges on whether the measures significantly curtail Russian exports. President Trump said he cancelled a planned summit with President Vladimir Putin in Hungary, describing the timing as “not right,” but noted that he prefers sanctions to be temporary. Putting some light on the matter, he said, “I like to remove sanctions quickly.” He also acknowledged that such measures have concerns that may erode the U.S. dollar’s dominance in global trade. For now, oil traders are bracing for heightened volatility, with the latest geopolitical developments setting the tone for energy markets in the weeks ahead.

Disclaimer: At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations