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US attack on Iranian nuclear sites roils oil market, India braces for possible price surge
New Delhi: Global crude oil prices may face sharp upward pressure when markets open for trade Monday, after the US launched air strikes on three Iranian nuclear facilities — Natanz, Fordo and Isfahan — escalating tensions in the Middle East.
The strikes have raised concerns of supply disruptions that could hit major importers like India, which depends on overseas oil for more than 85% of its energy needs.
In a televised address on Sunday (India time), US President Donald Trump confirmed the direct American assault on Iran's nuclear programme, ending days of speculation about Washington's entry into the Israel-Iran conflict. He warned that further strikes could follow.
Read this | Mint Primer: What if the US joins Israel's war with Iran?
'Remember, there are many targets left. Tonight was the most difficult of them all by far, and perhaps the most lethal. But if peace doesn't come quickly we will go to those other targets with precision, speed and skill," Trump said.
Hormuz threat puts India's energy security at risk
The strikes have amplified fears of a possible Iranian response, particularly threats to block the Strait of Hormuz, a narrow chokepoint through which nearly 20% of global crude oil and liquefied natural gas flows. Energy markets have long feared that any disruption here could trigger a severe supply crunch.
'Concerns remain over whether supplies through the Strait of Hormuz would be blocked. Refiners are keeping a close watch and looking for alternate sources in case supplies through the strait are halted," said an official with a state-run oil marketing company.
Read this | Mint Explainer | Strait of Hormuz: Will Iran shut the vital oil artery of the world?
Iran currently produces about 3.3 million barrels per day (mbd) of crude oil, exporting 1.8-2.0 mbd. While Iranian oil facilities have reportedly been hit, the extent of damage remains unclear. But the larger risk lies in a broader regional conflict that could pull in other major oil producers in the Gulf, said ratings agency Icra Ltd in a recent report.
India could face significant cost pressures even though it no longer buys oil directly from Iran due to US sanctions. Crude supplies from Iraq, Saudi Arabia, Kuwait and the United Arab Emirates, all routed via the Strait of Hormuz, account for nearly half of India's total imports. About 60% of its natural gas imports also pass through this critical passage.
Since 13 June 2025, when the Israel-Iran conflict began, crude prices have risen from $64-65 per barrel to $74-75 per barrel.
Oil is likely to average around $70-80 a barrel in FY26, and a sustained rise from current levels risks a reduction in India's growth forecasts, Icra Ratings Ltd had said on Friday.
Read this | India concerned about crude oil supply disruptions in Strait of Hormuz as prices surge after Israel's attacks on Iran
'A sustained flare-up in the conflict poses upside risks for estimates of crude oil prices, and India's net oil imports and the current account deficit. A $10/bbl increase in the average price of crude oil for the fiscal will typically push up net oil imports by ~$13-14 billion during the year, enlarging the CAD (current account deficit) by 0.3% of GDP," Icra noted.
India's import bill in FY25 stood at $137 billion, according to the Petroleum Planning & Analysis Cell.
"Impact on the import bill will depend on how long the elevated prices sustain. However, a 10% increase in crude prices may lead to a 3% increase in the import bill given that crude oil comprises about 30% of India's total imports. With this, the trade deficit may increase to 0.1-0.2% of GDP. There would be some pressure on the currency but an impact on GDP is not seen as of now," said Madan Sabnavis, chief economist at Bank of Baroda.
Icra had also said that changes in crude oil prices are likely to translate faster into higher wholesale and consumer inflation. For every 10% increase in crude oil prices, wholesale inflation could rise by 80-100 basis points, while consumer inflation may increase by 20-30 basis points, depending on the extent of pass-through into retail fuel prices.
'Only about 8% of the energy supplies moving through the strait can be rerouted via alternative corridors," said Prashant Vashisht, vice president at Icra. "If the strait is blocked, India would have to source more from regions like Russia and Nigeria."
On Friday, Brent crude futures on the Intercontinental Exchange closed at $77 a barrel, down 2.33% amid earlier uncertainty over US military involvement.
Oil market volatility is expected to spike when trading resumes, said Rahul Kalantri, vice president for commodities at Mehta Equities. 'We expect a knee-jerk rally potentially pushing Brent to the $80–$85 range or beyond if further conflict escalates," he said, adding that a full blockade of the Strait could drive prices 10–20% higher.
Also read | Oil is warming up, but India's inflation may escape the heat
Earlier this month, JP Morgan had warned that a major escalation could push crude oil prices as high as $120 a barrel. However, the bank noted that so far, despite multiple historical threats, the Strait of Hormuz has never been fully closed. 'Crucially, for all of recorded history, crude oil continued to flow," JP Morgan wrote.
The Indian government is closely monitoring the evolving situation. The petroleum ministry has held consultations with oil marketing companies to assess the state of domestic supplies and build contingency plans.
