Oil prices may surge as US attack on Iran heightens geopolitical tensions

The US bombing of Iran's nuclear sites has led to a widening of the Israel-Iran war and a further escalation in
geopolitical tensions
that could lead to a surge in global oil prices, which have already shot up by close to 20 per cent this month.
The benchmark Brent crude futures were trading at around $77 a barrel, and the market is reported to be bracing for another spike in prices with the US having stepped into the
Middle East conflict
.
A wider Middle East conflict is expected to have an impact on oil supplies from Saudi Arabia, Iraq, Kuwait and the UAE, which would lead to a sharp spike in the prices. Shipping could also get hit as the Houthi rebels have already warned that they would resume their attacks on ships if the US attacked Iran.
India imports around 85 per cent of its crude oil requirement, and a surge in oil prices can lead to an increase in its oil import bill and push up the rate of inflation, which can hurt economic growth. The larger outflow of foreign exchange can also lead to a weakening of the rupee vis-a-vis the US dollar.
According to a report by Emkay Global, Iran produces around 3.3 million barrels per day (mbpd) of crude oil (3 per cent of global) and exports around 1.5 mbpd, with China being the main importer (80 per cent), followed by Turkey. Iran is also on the northern side of the Strait of Hormuz/Persian Gulf through which 20mbpd+ of oil trade flows from countries such as Saudi Arabia and the UAE. In the past, Iran has warned of blocking this route.
However, with OPEC+ announcing another higher-than-expected production hike in July, fundamentally oil markets remain well supplied and further Iranian supply cuts can be accommodated, the Emkay report states.
As far as the impact on the Indian economy is concerned, the report states: "As of now, we are not changing our forecasts and continue to see
CPI inflation
undershooting RBI's estimate of 3.7 per cent to average much lower 3.3-3.4 per cent in FY26. We note that every $10/bl increase in oil leads to an annualised gain of 35 bps in CPI inflation.
Emkay Global said it maintains FY26 CAD/GDP at 0.8 per cent, at Brent 70/bbl, with every 10$/bbl leading to upside risk of 0.4-0.5 per cent, other things remaining equal.
"Our energy team maintains a positive view on India's oil market companies on the back of strong marketing margins and core GRMs (gross refining margins), also holding up to $75/bbl Brent for the remaining part of the year, the report added.

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India's oil supply chain safe from Hormuz closure: Puri

NEW DELHI: India's oil supply chain remains stable as a result of diversification in the last few years, oil minister Hardeep Puri said on Sunday as Iran's Parliament passed a motion calling for blocking the Strait of Hormuz, the critical choke point accounting for a fifth of global seaborne oil and a third of LNG shipments. 'We have been closely monitoring the evolving geopolitical situation in the Middle East since the past two weeks. Under the leadership of PM @narendramodi Ji, we have diversified our supplies in the past few years and a large volume of our supplies do not come through the Strait of Hormuz now,' he said in a post on microblogging site X. Indeed, latest data from analytics firm Kpler showed Indian refiners pivoting away from the Middle-East since the outbreak of hostilities between Israel and Iran stoked fears of Hormuz closure. In June, for example, oil imports from Russia and the US outpaced combined volumes of from traditional Middle East suppliers such as Iraq and Saudi Arabia. India currently imports oil from 13 countries. India does not buy any oil from Iran. But Hormuz is still crucial for India as 40% of its oil imports still passes through this narrow waterway between Iran and Oman. Puri, however, assured citizens on supplies. 'Our Oil Marketing Companies have supplies of several weeks and continue to receive energy supplies from several routes. We will take all necessary steps to ensure stability of supplies of fuel to our citizens,' he said. India currently imports oil from 13 countries. India does not buy any oil from Iran. But Hormuz is still crucial for India as 40% of its oil imports still passes through this narrow waterway between Iran and Oman. The last word depends on Iran's Supreme Council, which has to approve the Parliament motion. Closure of Hormuz could lead to an upheaval in global oil trade and spike in crude prices since the alternative routes for evacuation of Middle-East oil is limited to about 2-3% of daily global supplies. The strait last effectively closed during the Iran-Iraq 'Tanker War' in 1984.

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43 minutes ago

• First Post

Iran moves to shut Strait of Hormuz: What it means for India and the world

Iran's threat to close the Strait of Hormuz after US airstrikes on its nuclear sites could trigger a global oil shock, disrupt trade routes and push prices sky-high. With over 60% of its crude coming from the Gulf, India faces serious energy and economic risks. read more Strait of Hormuz, Makran region in southern Iran and southwestern Pakistan, Gulf of Oman and the northern coast of Oman as seen from space. (Photo by NASA Earth Observatory/ AFP) The Strait of Hormuz, the world's most critical oil chokepoint is back in global focus after Iran hinted at a possible closure following a major US airstrike on its nuclear facilities. If Iran follows through, the move could trigger a seismic shock across global energy markets and pose significant risks to major oil importers like India. What sparked the threat? Following the US bombing of three major Iranian nuclear sites this morning, Tehran has indicated that closing the Strait of Hormuz for shipping is one of the options on the table to pressure its adversaries. On Saturday, President Donald Trump announced a 'very successful' military operation that targeted three Iranian nuclear sites—Fordow, Natanz, and Esfahan—with full payloads of bombs. In response, Iran's parliament indicated support for closing the Strait of Hormuz, although the final decision rests with its Supreme National Security Council. STORY CONTINUES BELOW THIS AD Esmail Kosari, a senior Iranian lawmaker and Revolutionary Guard commander, said the move to block the strait 'will be done whenever necessary.' Iran's state media has amplified these signals amid growing tensions with Washington, following what Tehran calls an act of 'unprecedented aggression.' Why is the Strait of Hormuz so vital? The Strait of Hormuz lies between Iran and Oman and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. At just 21 miles wide at its narrowest point, it's one of the world's most strategic maritime arteries. According to 2023 estimates, over 17 million barrels of oil—around 20% of global daily demand—pass through the strait each day. Key exporters like Saudi Arabia, Iraq, the UAE, Kuwait, Qatar, and even Iran itself rely on it for crude and liquefied natural gas (LNG) shipments. While alternate pipelines exist, they can only divert around 2.6 million barrels per day—barely a fraction of the daily flow through Hormuz. How would a closure affect the world? Global oil prices may skyrocket A complete or even partial blockade could send oil prices soaring past $120–150 per barrel, depending on the length of the disruption. Brent crude has already surged above $90 in anticipation, with West Texas Intermediate (WTI) not far behind. Energy crises in Asia and Europe: Countries like India, China, Japan, and several European nations, all of which rely heavily on Gulf energy imports, could face inflation, energy shortages, and economic turbulence. Europe, already reeling from the fallout of the Ukraine war, may find itself in deeper crisis if Qatari LNG shipments are blocked. According to a recent analysis by the International Energy Agency, even a brief disruption of passage through the Strait of Hormuz will have a significant impact on oil markets. 'With geopolitical and economic uncertainties affecting oil producers and consumers alike, oil supply security remains high on the international energy policy agenda,' it said. Disruption to global shipping Beyond oil, the Strait is a vital route for container ships and cargo vessels. Its closure would increase freight costs, delay shipments, and reroute vessels through longer, more expensive paths—adding to already strained global supply chains. 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Nearly 30 per cent of global oil and a third of the world's LNG (liquefied natural gas) passes through the Strait daily and its closure would immediately reduce global supplies triggering a spike in prices, they said. STORY CONTINUES BELOW THIS AD India, which imports over 60% of its crude oil from the Gulf, is particularly exposed. A disruption at Hormuz could: *Spike fuel prices domestically, impacting inflation and household spending. *Increase shipping and insurance costs for rerouted crude and LNG. *Delay imports from major suppliers like Qatar, Iraq, and the UAE. *Disrupt bilateral trade with Middle East partners, especially in sectors like chemicals, fertilisers, and heavy industry. *India's strategic oil reserves could cushion the blow temporarily, but prolonged disruption would pressure the economy and force urgent diplomatic manoeuvring. The shutting down of the narrow passage would have significant global repercussions across energy markets and it will impact India's energy security as well, Dr Laxman Kumar Behera, Associate Professor at Special Centre for National Security Studies at the Jawaharlal Nehru University told PTI. Behera said any disruption in the critical shipping lane, which is a geopolitical flashpoint, will majorly impact India's crude oil import from Iraq and to an extent from Saudi Arabia. STORY CONTINUES BELOW THIS AD Could Iran withstand the fallout? While Tehran may use the Hormuz threat as strategic leverage, analysts warn that closing the strait could backfire on Iran itself. Much of Iran's own oil exports—official or under-the-radar—transit through Hormuz. Cutting off this revenue stream, especially amid sanctions, would damage its already fragile economy. Moreover, a blockade would likely provoke military retaliation from the U.S. and its allies. Even countries like China, which continue to buy Iranian oil, may oppose such a move, leaving Iran further isolated. What's next? US Secretary of State Marco Rubio called on China to pressure Tehran against escalation, warning that closing the strait would be 'economic suicide' for Iran. He added that the U.S. and its allies are prepared to respond if the closure goes ahead. With military tensions flaring and energy markets on edge, the coming days could determine whether this crisis remains a geopolitical standoff—or spirals into a global oil shock with far-reaching consequences for India and the world.

Hindustan Times

an hour ago

• Hindustan Times

‘Large volume of our supplies don't come through Hormuz': Hardeep Puri assures fuel stability amid Middle East tensions

As tensions continue to rise in the Middle East, raising the likelihood of Iran closing the Strait of Hormuz, India is closely monitoring global oil trends. Around one-fifth of the world's oil consumption passes through the Strait of Hormuz, which is situated between Iran and Oman. (Reuters) Union minister for petroleum and natural gas, Hardeep Singh Puri, has reiterated that India has adequate oil supplies to meet its needs. 'We have been closely monitoring the evolving geopolitical situation in the Middle East since the past two weeks,' Puri said in a post X. The Union minister noted that India has 'diversified our supplies in the past few years and a large volume of our supplies do not come through the Strait of Hormuz now.' Puri said that the nation's oil marketing companies have several weeks' worth of supply, adding that they 'continue to receive energy supplies from several routes.' The Union minister assured that all necessary steps will be taken to ensure the stability of supplies of fuel to Indian citizens. ALSO READ | Iran hints at Strait of Hormuz closure. How will it impact Indian crude imports? Last week, following the Israeli strikes on Iran, Puri asserted that India has enough energy supplies for the coming months. 'India's energy strategy is shaped by successfully navigating the trilemma of energy availability, affordability and sustainability,' he said, adding that, 'We have adequate energy supplies for the coming months.' The brewing tensions over the closure of the Strait of Hormuz have led countries to think about the possible repercussions on oil prices. NDTV reported, citing sources, that the central government might considering reviewing the excise duty cuts on fuel if the crude oil price goes above $105 per barrel. Impact on India if Strait of Hormuz is closed India, the world's third-largest oil importer and fourth biggest gas buyer, imports over 85 per cent of its crude oil needs and roughly half its natural gas requirement, a news agency PTI report said. Of these, over 40 per cent of the oil imports and half of the gas imports come from the Middle East. However, the closure of the Strait of Hormuz, which is the passage of around one-fifth of the world's oil consumption, might impact India's energy sector and global oil prices. ALSO READ | Strait of Hormuz: Why the narrow waterway is at stake as Israel-Iran tensions rise About 2 million barrels per day of crude oil out of India's total import of 5.5 million barrels per day transit through the Strait of Hormuz. However, industry officials and analysts have reportedly said that India is not likely to lose sleep even if the Strait were shut down. This is because it has alternative sources, from Russia to the US to Brazil, already readily available to fill any void. India's principal supplier of gas, Qatar, does not use the Strait of Hormuz for supplies to the nation, PTI reported. And other sources of liquefied natural gas (LNG) in Australia, Russia, and the US would also remain untouched by the narrow waterway's closure. While India imports around 90 per cent of its crude oil, more than 40 per cent of those imports originate from Middle Eastern countries, such as Iraq, Saudi Arabia, the United Arab Emirates, and Kuwait, whose exports pass through the Strait of Hormuz. However, in recent years, Russia has become India's largest supplier of crude oil, which is refined into fuels like petrol and diesel. In June, Indian refiners imported around 2 to 2.2 million barrels per day of Russian crude oil, the highest in the last two years.