The European Union (EU) is considering temporarily freezing its price cap on Russian oil as the turmoil in the aftermath of the protracted Middle East conflict has resulted in a huge spike in energy prices, Bloomberg reported on Sunday
The EU had set a dynamic mechanism in 2025 according to which the cap is automatically adjusted once every six months to remain 15% below the average price of Russia's Urals, according to the news outlet.
The cap is now set at $44.10 per barrel and is review is to come into play later later this summer. EU rules prohibit European companies from providing services including insurance and transportation for Russian crude sold above the threshold set.
Oil prices have flared up after the US-Israeli strikes on Iran that began on February 28. As the conflict intensified, Iran effectively shut the Strait of Hormuz, disrupting energy supplies worldwide and sending oil prices soaring.
The Bloomberg report said EU officials have expressed concern that soaring oil prices due to the Middle East conflict and the resultant disruptions in the Strait of Hormuz could mean that the next cap is likely to be significantly higher.
The hopes of an end to the conflict are also not concrete, given the back-and-forth negotiations between the Trump administration and the Iranian regime.
President Donald Trump has sought several changes to the proposed draft to finalize a ceasefire deal on which his US envoys and Iranian negotiators have agreed broadly.
The contentious issues include opening of the Strait of Hormuz, through which a fifth of the world's energy transited before the conflict erupted.
The report quoting unnamed sources said the next price cap review, slated in July, would likely see the level rise to at least $65, more than than the previous $60 threshold set collectively by the Group of Seven.
The move is envisaged to be part of the bloc's latest sanctions package. It would be the 21st package of sanctions unleashed as a punitive measure by the EU since Russia invaded Ukraine in 2022.
The other reported options the EU is considering include pausing the automatic increases until the end of the year. It is also pondering to revert to the $60 cap.
The EU is also mulling other steps that include targeting more banks, oil traders, refineries and crypto operators of nations used by Russia in a bid to overcome over the bloc's restrictions.
Russia has flayed the EU oil price cap, calling it illegal, and has also barred oil shipments to countries that adhere to it. Moscow has repeatedly termed the process as a a "distortion and destruction of the market pricing process."
Moscow has rerouted most of the energy it once exported to EU nations to China and India.
The EU may also consider curbs on companies in countries including China, and India, which are reportedly supplying Moscow with goods sanctioned by it.
The US has issued a sanctions waiver on Russian oil purchases to alleviate pressure on the oil markets. The move was intended to allow vulnerable countries to buy Russian oil already at sea, Washington had said. The sanctions waiver was extended earlier in May as the conflict in the Middle East continued.
