How the Iran War and EU Sanctions Are Impacting Russian Gas Supply - 2026

The US-Israeli military strikes on Iran launched on February 28, 2026, and the subsequent near-closure of the Strait of Hormuz have triggered a major reshuffling of global natural gas flows, placing Russia at the center of an intensifying energy supply crisis.

Before the conflict, Russia was already navigating a tightening sanctions environment. In January 2026, the European Union gave final approval to a regulation banning imports of Russian pipeline gas and LNG under its REPowerEU framework. Short-term LNG contracts are set to be prohibited from April 25, 2026, short-term pipeline gas contracts from June 17, 2026, and all remaining long-term contracts by the end of 2026 for LNG and by September 30, 2027, for pipeline gas. The regulation passed with 24 votes in favor, Bulgaria abstaining, and Hungary and Slovakia voting against. EU member states were required to submit national diversification plans by March 1, 2026.

Despite these restrictions, Russian gas still accounted for roughly 13% of EU imports in 2025, worth over 15 billion euros annually. In January 2026, Russian LNG deliveries to the EU reached a monthly record of approximately 2.276 billion cubic meters (bcm). The EU remained the largest single buyer of Russian LNG, absorbing 49% of total Russian LNG exports, followed by China at 23% and Japan at 18%. In February 2026, every single cargo from the Yamal LNG plant in the Arctic went to EU nations, with zero shipments reaching China or other Asian markets.

The Iran war changed the picture dramatically. Qatar, which accounts for roughly 20% of global LNG supply, halted production after Iranian drone strikes hit the Ras Laffan and Mesaieed Industrial City facilities. Shipping through the Strait of Hormuz, a chokepoint for about one-fifth of global oil and LNG trade, came to a near standstill. European benchmark gas prices on the Dutch TTF surged from 31.96 euros per megawatt-hour on February 27 to above 60 euros per MWh by March 3, briefly touching a three-year high of 63.77 euros. On March 9, TTF prices spiked again to nearly 70 euros per MWh as the conflict entered its second week.

Russia moved quickly to capitalize on the crisis. Kremlin spokesman Dmitry Peskov stated on March 6 that Moscow was observing a significant increase in demand for Russian energy resources. On March 9, President Vladimir Putin held a televised meeting with policymakers and energy executives, telling them it was important for Russian energy companies to take advantage of the current conditions. He also signaled willingness to resume long-term cooperation with European buyers if they abandoned what he described as politically driven policies.

Russian Deputy Prime Minister Alexander Novak confirmed on March 9 that part of the LNG currently supplied to Europe would be redirected to markets in Asia-Pacific, naming China, India, Thailand, and the Philippines as potential new contract partners. This announcement came as EU gas storage levels stood at roughly 46 bcm at the end of February, well below the 60 bcm of 2025 and 77 bcm of 2024 at the same period.

Russia's pipeline gas infrastructure provides a significant strategic advantage during the crisis. The Power of Siberia 1 pipeline delivered 38.8 bcm to China in 2025, exceeding its design capacity. In September 2025, Russia and China signed a memorandum to build the Power of Siberia 2 pipeline through Mongolia, with a planned capacity of 50 bcm per year. China's 2026-2030 development budget, released in early March, included provisions to accelerate preparatory work on this project. Separately, Gazprom exports around 20 bcm per year to Turkey through the TurkStream pipeline across the Black Sea, which also feeds Hungary, Slovakia, and Serbia.

The financial implications are substantial. Russia's oil and gas revenues had fallen to a four-year low in January 2026, with the federal budget recording a record deficit of 1.7 trillion rubles ($21.8 billion) that month. The 2026 budget was built on an assumed Urals crude price of $59 per barrel, which many analysts considered overly optimistic. The Iran war reversed this trajectory. According to estimates from the Centre for Research on Energy and Clean Air, Russia earned approximately 6 billion euros ($6.9 billion) from fossil fuel exports in less than two weeks since the conflict began. Higher gas prices directly benefit pipeline contracts to China and Turkey, many of which are partially indexed to oil prices.

The EU faces a difficult balancing act. European Commission President Ursula von der Leyen warned that returning to Russian energy dependence would be a strategic mistake, while International Energy Agency Executive Director Fatih Birol cautioned that looking to Russia for gas supplies would be economically and politically wrong. However, Hungary and other Moscow-friendly states have called for a suspension of the planned sanctions. Some analysts suggest that a prolonged disruption to Gulf LNG could force the EU to delay its ban on new Russian supply contracts.

The situation creates a paradox for global energy security. The EU's planned phase-out of Russian gas was designed to deprive Moscow of revenue and reduce Europe's vulnerability to supply manipulation. Instead, the Iran war has temporarily increased Russia's leverage over global gas markets, allowing Moscow to sell at higher prices while threatening to redirect supplies to Asia before EU bans take full effect. Whether this advantage proves lasting depends on the duration of the Middle East conflict and the pace of global LNG market rebalancing.