The US Treasury Department has announced major sanctions on two of Russia's largest oil companies, Rosneft and Lukoil, as part of an effort to squeeze the Russian government's finances over the conflict in Ukraine.
The companies were hit with sanctions that freeze assets and ban transactions with US entities, a move seen as a "major step" against Russia's energy sector, which supports the government's budget.
The announcement sparked a surge in global crude oil prices, with Brent futures up around 2.8% and West Texas Intermediate (WTI) up nearly 2.9% in international trading.
Market analysts said the sanctions on major Russian producers had stoked concerns about global supply shortages, supporting a surge in oil prices.
While the surge was modest, the market was also factoring in challenges in implementing and enforcing the sanctions and the possibility of broader follow-up action on the logistics of Russian oil exports.
The US move comes as Russia has shifted most of its exports to Asia, particularly China and India, to mitigate the impact of Western sanctions, seen as a factor adding to the complexity of global energy markets.
For oil producers, the increase is an opportunity for increased revenue, but for importing countries it means higher energy costs that could put pressure on inflation and fiscal rates.
In the near term, investors and governments are expected to pay attention to more information about the exact extent of the sanctions, their acceptance by Asian buyers, and Russia's countermeasures in managing its oil export flows.
