Analysis: Even if Russia loses Iran as an ally, it stands to profit from the chaos in the Middle East
There's long been an awkward tension at the heart of the Kremlin's complex relationship with the Middle East.
On the one hand, Russian alliances and economic influence there have traditionally been strong.
On the other, as one of the world's biggest oil and gas producers, Russia tends to profit when things in the energy-rich region go awry and the markets get spooked.
That's exactly what is playing out right now, with the Kremlin watching its Iranian ally being drastically weakened by Israeli airstrikes, while reaping the benefits.
On the face of it, Russia has so much to lose.
Iran has been a particularly useful 'strategic partner' for the Kremlin, not only sharing a disdain for Western values and influence, but also supplying the Russian military with vast squadrons of Shahed aerial drones, enabling the relentless bombardment of Ukraine.
Much of that drone production has, admittedly, long since moved to Russia. But with Ukraine's own drones now striking Russian production facilities deep behind the frontlines, that once reliable Iranian supply may eventually be missed.
There's also a faint but painful sense of humiliation for the Kremlin to have to stand by and watch yet another key Middle Eastern ally under ferocious bombardment, unable or unwilling to step in.
Moscow has issued strongly-worded statements, of course, condemning as 'illegal' Israel's attacks on Iran's nuclear facilities, adding that the strikes were creating 'unacceptable threats to international security.'
It also accused Western countries of manipulating the situation to 'settle political scores.'
But Russia's supposed alliance with Iran never extended to defending the Islamic Republic and there has been no Kremlin offer of any military support.
It's certainly true that a collapse of the Iranian regime, which is now an apparent Israeli objective, would add Iran to the growing Kremlin list of lost Middle Eastern alliances and client states, including Iraq, Libya and, most recently, Syria.
But here's that awkward tension again: things are not quite as bad for Moscow as they may seem. In fact, this latest Middle Eastern conflict is playing very nicely into the Kremlin's hands.
As well as the welcome financial windfall, courtesy of the surging price of crude oil, the Iran-Israel conflict is also opening up the taps, as it were, to diplomatic opportunities for a Kremlin that has faced years of international isolation over its war in Ukraine.
Russia has never stopped seeing itself as a major player in international diplomacy, with a rightful place at the top table alongside the US and China.
Now, the Kremlin has an issue on which it can jointly and productively cooperate with the United States, and possibly emerge as an indispensable US partner when it comes to eventually patching the region back together again.
As the only major political leader with a direct line to the Iranians, the Israelis and the United States, the Russian president, Vladimir Putin, is already carefully leveraging his pivotal position, signaling his willingness to act as a mediator, casting Russia as an important power broker in the Middle East.
In a recent call to the White House, Putin reminded President Donald Trump how Russia has been a long-time US ally when it comes to the Iranian nuclear issue – a heavy hint that he is open to being one again.
The White House, it appears, could be open to the idea: After the call, President Trump expressed a willingness to consider the Russian leader as a potential mediator in the conflict.
Since the start of President Trump's second term, Washington and Moscow have been desperate to find ways to broaden their relationship beyond the narrow focus on the Ukraine war. The fate of Iran and its nuclear ambitions have unexpectedly reemerged – along with the Arctic, economic cooperation and space exploration – as yet another area of potential common interest.
For the Kremlin – and maybe for President Trump too – that's a major boon.
Not so much for beleaguered Ukraine.
With an escalating Mideast crisis, and the US seemingly teetering on the brink of increasing its direct involvement, global attention has been suddenly diverted from the ongoing war in Ukraine – where intensifying Russian drone and missile strikes are taking an appalling toll – to the devastation being wrought in Israel and Iran.
And, for a while at least, the focus appears to have shifted firmly onto the Kremlin's role as a potential peacemaker in the Middle East, and away from its part in the war it is continuing to wage closer to home.
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Axios
21 minutes ago
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Iran parliament reportedly backs closing Strait of Hormuz, which could spike oil prices
Iran's parliament has endorsed closing the Strait of Hormuz, a vital oil transit point off its coast, but the authority rests with regime security officials, per summaries of state-controlled media. Why it matters: Impeding the strait would likely bring a massive spike in oil prices that would flow through to U.S. consumers. The narrow channel between Iran and Oman is the chokepoint for a quarter of the world's seaborne oil trade — and around one-fifth of all oil movements. Catch up quick: The threat is among the initial responses to yesterday's U.S. strikes on Iran's nuclear sites. Trying to block the strait would be the first time that the Israel-Iran conflict meaningfully affects global oil flows. Yes, but: Iranian efforts to close the strait and attack energy infrastructure in the Persian Gulf are "unlikely," Eurasia Group analysts said in a note earlier Sunday morning. "The US has amassed a massive military presence in the Gulf and surrounding region, and a move by Iran against the strait would almost certainly trigger a significant military response," they write. Eurasia said Iran is unlikely to hit strike targets while its own exports remain intact, but added: "Increased Iranian harassment of tanker traffic is likely in coming days." Driving the news: Vice President JD Vance said Sunday that closing the channel would be economically "suicidal" for the Iranians. "Their entire economy runs through the Strait of Hormuz. If they want to destroy their own economy and cause disruptions in the world, I think that would be their decision," he told NBC's "Meet the Press."
Yahoo
23 minutes ago
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Investors Set to Flock to Safety as World Awaits Iran's Response
(Bloomberg) -- Traders are forecasting a drop in stocks, a jump in crude prices and possibly a strengthening of the dollar as investors head for safety in the wake of the US attack on Iran's three main nuclear sites. Bezos Wedding Draws Protests, Soul-Searching Over Tourism in Venice One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Concern that the war will intensify even further is likely to push equity prices lower, while bonds may get a boost, market watchers say. The moves will be bigger if Iran responds with steps such as blocking the Strait of Hormuz, a key passage for oil and gas shipments, or attacking US forces in the region, they say. 'The initial reaction will be a flight to safety and equities will probably be weaker,' said Neil Birrell, chief investment officer at Premier Miton Investors. 'The level that stock markets are standing at, they're definitely going to face increased risk, there's no doubt about that.' Market reaction has been muted since Israel's initial assault this month: Even after falling for the past two weeks, the S&P 500 is only about 3% below its all-time high from February. Investors expect the conflict to be be localized, with no wider impact on the global economy, said Evgenia Molotova, a senior investment manager at Pictet Asset Management. 'But it all depends on how the conflict develops and things seem to be changing by the hour,' she said. 'The only way they take it seriously is if the Strait of Hormuz gets blocked because that will affect oil access.' Iran has vowed to impose 'everlasting consequences' for the bombing and said it reserves all options to defend its sovereignty. Still, downside is likely to be limited because some market participants have been preparing for a worsening conflict. The MSCI All Country World Index has pulled back 1.5% since Israel attacked Iran on June 13. Fund managers have reduced their stock holdings, shares are no longer overbought and hedging demand has increased, meaning a deep selloff is less likely at these levels. The biggest market reaction since the start of the escalation has been in oil, with Brent futures jumping 11% to $77 a barrel. Traders are preparing for another surge in crude prices even as it's unclear where the crisis goes from here. That rise is expected to restart on Monday, after the US assault dramatically raised the stakes in a region that accounts for a third of global oil output. Read more from the Markets Live blog: How Markets Will Trade the US Strikes on Iran Morgan Stanley's oil analysts said a quick resolution would allow prices to fall back to the $60s a barrel, but continued tension could leave oil in the current range. 'Fundamental disruptions to the global supply of oil with a possible hit to shipments through the region would push oil prices a lot higher from here,' they said. Meanwhile, the dollar has risen about 0.9% since the conflict started. It's a relatively small move given the US currency's traditional role as a haven in times of turmoil. The US currency has been battered in recent months by Donald Trump's trade and fiscal policies. 'The biggest trade around at the moment is short dollar,' said Birrell. 'No one likes it. But traditionally it's the safe currency people go to, and it might just be that this turns around the fortunes of the dollar.' The reaction was less straightforward in the $29 trillion market for US Treasuries since the conflict began. Yields initially sank but the moves swiftly reversed over concern about a resurgence in inflation. US Treasuries are, overall, little changed since June 13, with the yield on 10-year notes rising since then by less than two basis points to close Friday at 4.38%. Following are comments from strategists and analysts on how they expect investors to respond on Monday: Emmanuel Cau, head of European equity strategy at Barclays Plc In the very near term, markets may be worried about Iran retaliation, and whether or not it blocks the Strait of Hormuz... Recent crises in the region have shown that the impact on equities from oil shocks tend to be short lived, and usually end up as medium-term buying opportunities. In fact, if the conflict results in bringing more stability and peace to the Middle East, it could be seen as bullish for risk assets over the medium term. Diego Fernandez, chief investment officer at A&G Banco in Madrid 'We expect some risk off, but not an aggressive one. The world may be a safer place without the Iranian nuclear threat, but we still need to see the Iranian reaction and how the conflict evolves.' Anthony Benichou, cross-asset sales at Liquidnet Alpha trading desk Trump couldn't afford for this to drag on. If oil stays elevated too long, especially heading into the midterms, it's a political headache. High gas prices hit Main Street, fuel inflation, and turn voters against you. So the move had to be fast, surgical, and decisive. Note how impressive the risk premium has stayed contained in oil — short-term vols have spiked, but there's been little spillover elsewhere. If Iran were to shut down (the Strait of Hormuz), they'd be cutting off their own main revenue lifeline — effectively speeding up their own collapse. Alfonso Benito, chief investment officer at Dunas Capital It is a very worrisome situation. Investors have some hours to digest the attack before the market opens Monday, and a lot will depend on what Iran does if it responds or not. Anyhow, it's not good. Manish Kabra, head of US equity strategy at Societe Generale SA Equities are likely to only see a shallow drop because central bank policies are much more accommodative than in previous oil shocks. There's also no euphoria in markets in terms of flows. It won't be like we had in 2022 when the S&P 500 and European stocks dropped 20%. Our take is that the Fed may actually ignore any potential oil shocks and that's why I still say there's a good possibility that the S&P 500 will make new highs this year. Anthi Tsouvali, strategist at UBS Global Wealth Management We're definitely in a higher-risk environment than we were on Friday. Markets will react, but probably still modestly in equity markets. We're for sure going to see oil going higher. Investors will also have to think about the impact of higher oil on inflation, and if that's the case, Europe is going to be hit harder than the US. Uncertainty has been very high this year and now this is another event that's added to it. So we'll see some volatility but right now, given the information we have, I don't see that it's going to be long lived. So far, we haven't seen bombings of energy facilities and the Strait of Hormuz hasn't closed. Markets will appreciate that. While there's going to be risk-off sentiment for sure, hopefully it's not going to be long lived or too deep. Aneeka Gupta, head of macroeconomic research at Wisdom Tree UK Ltd. Up until now, the war was very much focused on the Middle East, but with the US's involvement this looks a lot more serious in nature and the risk is really spreading out in a very big way. In terms of markets, we'll definitely see the biggest impact in commodity markets and energy prices are likely to go even higher. We're also likely to see these tensions reverberate across equities. Markets are going to be pricing in a wide variety of possibilities about how Iran is going to escalate. The worst-case scenario would be Iran trying to close the Strait of Hormuz. The first impact would be seen in oil markets and then quickly resonate across stocks and bonds. From an equity market perspective, this is very much risk off. Charu Chanana, chief investment strategist at Saxo Markets in Singapore This marks a turning point for markets. While oil and gold are likely to surge on geopolitical risk, the bigger question is whether US assets can still command a safe-haven premium. Rising fiscal risks, institutional strain, and policy unpredictability could accelerate the fading of US exceptionalism. Trump's decision to bypass Congress adds to institutional concerns, likely putting upward pressure on US yields and questioning the credibility premium once attached to US assets. Beyond the immediate market reaction — higher oil, gold, and volatility — investors will be watching for a potential shutdown of the Strait of Hormuz or retaliation against US naval assets. These risks could drive oil sharply higher, add inflation uncertainty, and test the US dollar's safe-haven appeal amid rising concerns over fiscal dominance and institutional erosion. Shoki Omori, chief strategist at Mizuho Securities Co Capital will race toward classic refuges — Japan government bonds, the yen, Swiss franc and gold. Treasury yields would feel the downdraft almost immediately. History shows that when investors dump dollars, they often scoop up Treasuries, anticipating that the Federal Reserve will lean dovish to steady the ship. A measured statement could keep the greenback steady, but any rhetoric hinting at strikes on US soil or forces would likely jolt it downward. Dollar-yen could edge down to 144. Nick Twidale, chief analyst at AT Global Markets We're going to see a gap higher in gold, yen, Swiss franc and likely the dollar. Gold may shoot up to $3,400 very quickly but the key theme will be volatility — the moves might not stick if, for example, Trump decides the strikes are done. Trump has the bigger stick compared with Tehran, and as such his next move — be it a further escalation or heading back to the negotiating table — will matter more for markets. Gary Dugan, chief executive officer of The Global CIO Office We expect equities to react in a measured way, be it with some downside risk. Markets are not technically overextended with many trading within 3-5% of their 200-day moving averages. Unless we see a significant spike in oil prices we would expect equity markets to hang in around current levels. Nirgunan Tiruchelvam, an analyst at Aletheia Capital in Singapore There are 3 scenarios. A dramatic escalation in Mideast tension: This could see the Strait of Hormuz being blocked and a cycle of revenge. The second is an end to the hostilities in a similar manner that India-Pakistan ended last month. The third is the continuation of the low-intensity bombing by both sides. We expect risk assets to be under pressure under scenarios 1 and 3. Oil and other commodities will also rally under these scenarios. Jason Schenker, president of Prestige Economics The level of fear in global financial markets will hinge on the next wave of actions in and the potential duration of this conflict, and it may take days or weeks before the fog of war clears enough for traders to take outlier positions with significant conviction. As for bonds, the impacts of this conflict could be mixed. While the Fed would have less leeway to cut interest rates due to higher crude oil prices, money leaving equity markets may flood into bonds and Treasuries as safe havens, sending bond prices higher and bond yields lower. Viraj Patel, strategist at Vanda Research This weekend's US strikes are another reason for hedge funds and CTAs to rush towards the exit on their bearish USD bets. We believe one of the biggest pain trades this summer could be a grind higher in the USD as the reasons for being short USD fall by the wayside. There's a perfect storm brewing for non-US equities — especially crowded cyclical European and Asian markets. Rising geopolitical risks are another headwind for global growth on top of the ongoing slowdown in cross-border trade driven by Trump tariff policies (which certain equity markets seem to be ignoring). We believe Europe and EM could underperform here as recent 'hot money' inflows unwind as global investors turn more cautious. --With assistance from Sydney Maki, Michael Msika, Srinivasan Sivabalan, Abhishek Vishnoi and Jaehyun Eom. Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P.
News24
23 minutes ago
- News24
‘Anxious' South Africa urges dialogue to end Israel-Iran conflict
The South African government says it has 'noted with a great deal of anxiety' the entry of the United States into the Israel-Iran war. The Presidency issued the statement on Sunday just hours after US President Donald Trump said the country had struck three nuclear sites in Iran on Saturday night. He said the facilities at Fordow, Natanz and Isfahan were 'completely and totally obliterated' and warned of further attacks if Tehran refused to 'make peace'. 'It was South Africa's sincerest hope that President Donald Trump would use his influence and that of the US government to prevail on the parties to pursue a dialogue path in resolving their issues of dispute,' Presidency spokesperson Vincent Magwenya said in a statement. 'South Africa calls on the United States, Israel and Iran to give the United Nations the opportunity and space to lead on the peaceful resolution of the matters of dispute, including the inspection and verification of Iran's status of uranium enrichment, as well as its broader nuclear capacity.' Iran's foreign minister, Abbas Araghchi, said the bombing was 'outrageous and will have everlasting consequences'. The US attacks come just over a week after Israel launched missiles at Iran and Tehran hit back by striking targets in Israel.
