War in Iran Will Not Save Russia’s Economy

While a flare-up in Iran could provide Moscow with a short-term financial ‘bonus’, it is not a remedy that secures permanent demand for the Russian oil and gas.

The Russian economy has entered a period of stagnation as its ‘war-driven bubble’ begins to burst. Though a total collapse still has not occurred, the convergence of overreliance on bank deposits, a critical labour shortage and surging inflation has left Russia’s financial stability more fragile than at any point since 2022 – as Tomasz Kasprowicz has written.

Yet it is also worth paying attention to how another primary financial engine for Russia’s war effort is fading. By the end of 2025 Russian oil and gas revenues reached their lowest point since 2020 due to external market pressures and international sanctions. Consequently, the Russian Finance Ministry’s figures reveal a massive budget gap of 72 billion US dollars, as the state struggles to balance its highest military expenditure in history against a shrinking revenue stream. Data released by the Finance Ministry in February shows that Russia’s federal deficit reached 1.718 trillion rubles (18.9 billion euros) in January alone, accounting for nearly 50 per cent of the government’s projected deficit for the entire year.

False booster shot for Russia’s economy

A conflict in Iran, especially one that compromises the Strait of Hormuz, would trigger a massive spike in global oil prices, potentially driving them into the 110-150 dollars per barrel range.