Oil prices jumped more than five percent Thursday after US President Donald Trump targeted Russia’s key oil industry with new sanctions in a bid to end the war in Ukraine.
The surge in crude prices came as major US equity indices rebounded from the prior day’s pullback after the White House confirmed a plan for Trump to meet with Chinese leader Xi Jinping next week to discuss trade.
Trump on Wednesday announced new sanctions against Russia’s two largest oil companies, Rosneft and Lukoil, saying his peace talks with President Vladimir Putin were not going “anywhere.”
The move was joined by another round of punishment by the European Union as part of attempts to pressure Moscow to end its three-and-a-half-year invasion of Ukraine.
“These new sanctions are likely to have a real impact,” said Arne Lohmann Rasmussen, an analyst at Global Risk Management.
According to industry analysts the two companies account for just over half of Russia’s oil output, and both also produce natural gas.
Analysts at Capital Economics said the move “could be a big enough shock to flip the global oil market into a deficit next year,” although they said the impact depends on the effectiveness of enforcement measures.