The Biden administration has imposed sweeping sanctions on Russia’s oil sector, leading to a rally in crude prices and a sharp decline in European equities.
New Sanctions Target Russian Oil Giants and Shadow Fleet
The US Department of the Treasury announced extensive sanctions on Friday, intensifying its efforts to cripple Russia’s oil industry. The measures target major oil companies Gazprom Neft and Surgutneftegas, as well as 183 shadow fleet vessels used to circumvent restrictions.
Treasury Secretary Janet Yellen stated that the sanctions build on the G7+ price cap strategy implemented in 2022, aiming to cut off Russian oil revenues that finance its military operations in Ukraine. The sanctions include a ban on US petroleum services supporting Russian extraction, set to take effect in February 2025.
The coordinated sanctions, mirrored by the UK, aim to restrict Russia’s access to global markets and curb its reliance on high-risk shipping practices. “These measures target opaque traders and shadow fleet vessels sustaining Russian oil exports,” the Treasury noted.
Markets React: Crude Prices Surge, European Stocks Fall
Oil prices spiked following the announcement, with West Texas Intermediate (WTI) crude rising 3.5% to $77 per barrel and Brent crude climbing 2.9% to $79.
Investors fear that tighter sanctions will further limit global oil supplies, exacerbating market instability.
Meanwhile, European equities suffered losses. The Euro STOXX 50 fell 0.9%, while the broader Euro STOXX 600 dropped 0.6%. Energy-intensive stocks like E.ON and Iberdrola plunged more than 4%. Spain’s IBEX 35 experienced the steepest decline, losing 1.4%.
Dollar Strengthens Amid Strong US Job Data
Currency markets also saw significant shifts. The euro dropped 0.5% to $1.0250, its lowest level since October 2022, while the British pound fell 0.6% to $1.2220, marking its weakest point since November 2023.
The US dollar’s rally was supported by robust employment data, with December’s nonfarm payrolls adding 256,000 jobs, far exceeding the forecast of 160,000. This marks the strongest job growth since March 2024, reinforcing the dollar’s dominance.
