For nearly four years, India emerged as the biggest beneficiary of Western sanctions on Russia, importing millions of barrels of discounted Urals crude and significantly reducing its import bill. But that advantage briefly disappeared in early 2026 when Russian oil, once sold at deep discounts, started commanding a premium over Brent crude amid an unprecedented supply disruption.
The dramatic reversal was triggered by the escalation of the US-Israel conflict with Iran, which severely disrupted shipping through the Strait of Hormuz—the world’s most critical oil transit chokepoint. With cargo movements from the Persian Gulf curtailed and freight costs surging, Indian refiners scrambled to secure alternative supplies, pushing demand for Russian crude to record levels.
From Sanctions Discount to Scarcity Premium
Following Russia’s invasion of Ukraine in 2022, Urals crude had consistently traded at discounts ranging from $10 to over $13 per barrel below Brent, making it the preferred choice for Indian refiners.
However, the Hormuz crisis completely altered market dynamics.
According to S&P Global Commodity Insights, delivered Urals crude (DAP India) traded above Dated Brent for the first time on record in March 2026. Within days, the premium widened dramatically as Indian and Chinese refiners competed aggressively for the limited Russian cargoes available outside the Persian Gulf supply chain.
The shift reflected a fundamental change in pricing. Russian crude was no longer cheap because of sanctions; instead, it became expensive because it was one of the few reliable supplies available during a regional energy crisis.
India’s Emergency Pivot
India imports more than 85% of its crude oil requirements, with the Gulf traditionally accounting for nearly half of those imports. When Hormuz shipments became uncertain, state-owned refiners including Indian Oil, Bharat Petroleum and Hindustan Petroleum rapidly increased purchases from Russia while also sourcing additional cargoes from Latin America and West Africa.
The scramble drove Russian crude prices sharply higher.
The premium also reflected soaring freight rates, higher insurance costs and longer voyage durations from Russian ports compared with Gulf suppliers.
Margins Under Pressure
While Russian crude ensured India’s energy security during the crisis, it also squeezed refinery economics.
State refiners that had built business models around discounted Russian crude suddenly found themselves paying Brent-equivalent or even higher prices while continuing to sell petroleum products in a tightly regulated domestic market. Reuters reported that this margin pressure contributed to weak quarterly financial performance at major public-sector refiners.
The Discount Returns
The premium proved temporary.
As shipping through the Strait of Hormuz gradually normalised and Middle Eastern producers restored exports, the urgency for Russian barrels eased. By July 2026, discounts on Urals crude had widened once again to more than $10 per barrel below Brent as supplies recovered and buyers regained multiple sourcing options.
A Lesson in Energy Security
The episode underscored an important reality of global oil markets: crude pricing is driven not only by sanctions or production costs, but also by geopolitics and logistics.
For India, Russian crude has evolved from an opportunistic source of discounted oil into a strategic pillar of energy security. The Hormuz crisis demonstrated that in times of severe supply disruption, availability can become more valuable than price, transforming discounted barrels into premium cargoes almost overnight.
