Russia’s flagship Urals crude oil has jumped nearly 15% following the outbreak of hostilities between Israel and Iran, according to analysts at BCS Bank. Urals – which is a key contributor to the Russian national budget – was trading at 5,000 rubles (£47) per barrel on Friday (June 13), up from less than 4,400 rubles (£41) just three days earlier. This marks its lowest level in two years.

These oil prices are far below the Russian government’s expectations. The original budget had assumed a price of 6,700 rubles (£63), while the Economic Development Ministry’s revised forecast in May still set a target of 5,300 rubles (£50). While Urals averaged around 5,900 rubles (£55) in the first quarter of 2025, oil and gas revenues have still fallen by 10% year-on-year.

By May, the decline had reached 34%, with total receipts from energy companies plummeting to just £4.8 billion – the lowest monthly figure since January 2023, according to the Finance Ministry.

The Russian government is expected to collect 8.3 trillion rubles (£78 billion) in oil and gas taxes this year – 2.6 trillion rubles (£24.3 billion) less than initially projected. As a result, the country’s deficit is set to soar to an eyewatering 3.8 trillion rubles (£5.6 billion) – more than triple the originally planned figure and the highest since the COVID-19 pandemic.

A full-scale oil price surge could be triggered if Iran follows through on threats to close the Strait of Hormuz, analysts have warned. Around one-fifth of the world’s oil is transported via this chokepoint between the Persian Gulf and the Gulf of Oman.

On Saturday (June 15), Iran issued the threat after Israeli forces targeted oil storage facilities and infrastructure at the South Pars gas field – the largest in the country.

If the strait is blocked, oil prices could spike well into the triple digits, with $130 per barrel potentially just the beginning, analysts at BCS warned.

However, if the two countries continue to limit strikes, the price of oil is likely to rise by no more than £3.70 per barrel compared to pre-conflict levels.