The United States has imposed sanctions on Russia’s two largest oil companies—Rosneft and Lukoil—as part of a renewed strategy to curb Moscow’s funding of the Ukraine war, sparking a sharp 5% rise in global oil prices and prompting jitters in India’s energy market.

The sanctions, announced by President Donald Trump, target the oil giants that produce more than 5% of global supply, marking a significant policy shift as the U.S. seeks to cut Russia’s ability to finance its military operations. U.S. Treasury Secretary Scott Bessent explained that the move is designed to choke off a major revenue source for Russia’s war machine.

Russia responded swiftly, decrying the U.S. action as “counterproductive” to peace negotiations and warning that it may retaliate. Despite the oil companies’ central role in the Russian economy, analysts note that state revenues might be less affected since much of Russia’s oil sector is taxed domestically rather than exported.

India, a major buyer of discounted Russian oil, is now under pressure to reduce its imports of Russian crude. Indian refiners are reportedly assessing how to comply with the sanctions before the November 21 deadline set by Washington for companies to wind down transactions with the sanctioned firms.

The situation has sent global crude benchmarks higher, contributing to inflation and supply concerns. Market observers warn that the disruptions may force Russia to offer steeper discounts on its oil to maintain demand, but could also tighten available supply if buyers remain cautious.

The sanctions come against the broader backdrop of escalating conflict in Ukraine, where both Ukraine and its Western backers have pressed for increased Russian financial pressure. Ukrainian President Volodymyr Zelenskiy welcomed the U.S. decision but called for further steps.