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The Hindu
2 days ago
- Business
- The Hindu
Why oil prices are increasing amidst Iran-Israel tensions
The story so far: Escalating tensions between West Asian nations Iran and Israel since last week sent prices of oil spiralling upwards with fears mounting about a potential disruption in oil supplies globally. The benchmark Brent crude futures had soared about 9% Friday (June 13) to $75.65 for a barrel after it hit an intraday high of $78.50/barrel – a near five-month high. The paradigm however sought to ease Monday when news reports suggested that Tehran has asked Qatar, Saudi Arabia and Oman to press U.S. President Donald Trump to help Israel agree for an immediate ceasefire. At the time of writing (about 8 p.m.), Brent crude futures were about 2.4% higher from Monday at $74.98/barrel. Why is the tension causing oil prices to rise? At the centre of the entire paradigm is Iran's recurrent threats to close down the Strait of Hormuz. It is the chokepoint that connects the Persian Gulf with the Gulf of Oman and Arabian Sea. For perspective, chokepoints are narrow channels along widely used global sea routes that are utilised for transporting oil through sea. The closure of a chokepoint, even if for a temporary period, can translate to potential delays in supply, reduction in traffic and rise in shipping and insurance costs. All of it culminating into increased price of energy fuel. Though alternatives exist for some chokepoints, but they could entail significant increase in transit times. In fact, from the larger perspective of trade, Pankaj Chadha, Chairman of the Engineering Exports Promotion Council of India explained The Hindu last week that the escalation of the conflict in the Middle East would bar access to the Suez Canal and the Red Sea. '(This) will have a huge cost and time escalation for Indian exports by ship,' Mr. Chadda held. U.S.' Energy Information Administration (EIA) in an analysis published Monday held that the Strait was 'deep and wide enough' to handle the world's largest crude oil tankers. It further observed that the Strait facilitated transportation of an average of 20 million barrels each day (md/d) in 2024. This is equivalent to approximately one-fifth of the global petroleum liquids consumption. Additionally, the Paris-based International Energy Association (IEA) attributed the Strait to have served as the exit route from the Gulf for approximately one-fourth of the global oil supply including from major oil-producing nations Saudi Arabia and United Arab Emirates alongside Kuwait, Qatar, Iraq and Iran itself. According to EIA's estimates, 84% of the crude oil and condensate alongside 83% of liquified natural gas transported via the Strait headed to Asian countries in 2024. Primarily, this includes China, India, Japan and South Korea. How is the world positioned to manage the uncertainty? IEA indicated in their June outlook published Tuesday that oil markets in 2025 'look well supplied' in the absence of a major disruption. This is premised around expectations of supply being able to surpass demand. IEA forecasts world oil demand to increase by 720 thousand barrels a day (kb/d) this year whilst supply is projected to rise 1.8 mb/d to 104.9 mb/d. Additionally, it observed from preliminary data that global observed oil inventories have risen by 1 mb/d on an average since February, and 93 million barrels in May alone. However, it cautioned, 'While the market looks comfortably supplied now, the recent events sharply highlight the significant geopolitical risk to oil supply security.' Furthermore, JM Financial observed in their recent sectoral report that there could be a 'huge upside risk' if Iran disrupts the supply from the Strait of Hormuz. However, it holds the scenario is 'extremely unlikely' as in the past, for 'U.S. and Western countries are likely to take strong measures against any such disruptions given the huge risk it can pose to global oil and gas prices and, hence, inflation.' Imperative to note though that Iran's own production capacity may not have a significant bearing in the paradigm. This is owing to U.S. sanctions on import of Iranian crude oil. Tehran's major export destination is China. Refineries in the Asian country have particularly benefited from discounted fuel from the West Asian counterpart. What does it mean back home? Aditi Nayar, Chief Economist at ratings agency ICRA, observed that while crude oil prices have risen quite sharply over the past few days, it has been from 'rather benign levels'. She holds that should the price persist at the current levels, it may not lead to a 'material revision' in ICRA's GDP forecast of 6.2% for the fiscal. 'However, a sustained increase from the current levels would weigh on India Inc's profitability and the extended uncertainty may further delay private capex expenditure,' Ms. Nayar told The Hindu. She summarised this could potentially translate to a downward revision in ICRA's GDP growth projections for the second half of the fiscal. Albeit in an unrelated context, Paras Jasrai, Associate Director at India Ratings and Research observed the conflict between Israel and Iran added 'fuel to the global economic uncertainty' marred by tariffs-led volatility. 'The crude oil prices are in the vicinity of $75/barrel. If the conflict escalates further, then that could spring up wholesale inflation and have broader economic ramifications,' he held. Mr. Jasrai adds that favourably though declining food prices have 'given a cushion in keeping wholesale inflation at tepid levels'. The primary concern with respect to India could potentially be about how things shape up at the Strait of Hormuz. This is because India does not import petroleum crude from Tehran. Amit Kumar, Partner and Energy and Renewable Industry Leader at Grant Thorton Bharat had told The Hindu last week, 'India imports more than 80% of its crude oil needs. Hence, even if direct imports from Iran are minimal, global price spikes due to conflict will raise crude oil import costs.' On the aspect of supply, imperative to note that Union Petroleum Minister Hardeep Singh Puri in a social media post on Monday has affirmed the India having diversified their import basket substantially are comfortably placed to meet their fuel supply needs. With inputs from TCA Sharad Raghavan
United News of India
3 days ago
- Business
- United News of India
India's engineering goods export sector continues to show resilience: EEPC India
Kolkata, June 17 (UNI) India's engineering goods export sector continues to show resilience despite persistent global challenges, though it recorded a marginal dip in shipments during May 2025, the cumulative number stays positive, according to EEPC India. As per the official data, engineering goods exports declined 0.8 per cent year-on-year in May-25 to $9.89 billion as compared to $9.97 billion in the same month last year. Cumulatively, engineering goods exports during April-May period of FY26 stand at $19.40 billion as against $18.52 billion in the same period last year thus registering a growth of 4.7 pc, EEPC India chairman Pankaj Chadha said on Tuesday. Overall global situation, however, remains volatile. Uncertainty has only been mounting due to geopolitical tensions in the key parts of the world. The latest Israel-Iran conflict threatened to multiply the challenges for the exporting community. Apart from rise in input costs as a result of a jump in crude prices, there was heightened concern around blocking of Straits of Hormuz by Iran in case tensions further intensify. In that case, logistics costs could surge significantly, Chadha said. The doubling of tariff by the US on steel, steel products, and aluminum to 50 pc is already threatening to impact engineering shipments during the current fiscal. It is expected that once India and the US reach an agreement, the tariffs will be reduced, he added. UNI PC PRS
United News of India
7 days ago
- Business
- United News of India
EEPC India holds open house session on India-US bilateral trade
New Delhi, June 13 (UNI) EEPC India, the country's apex engineering exports promotion body, on Friday held an Open House Session on the India-US Bilateral Trade Agreement (BTA) here in which participating members shared that buyers in the US are delaying orders due to policy uncertainty, making it hard for businesses to plan and grow. Even as India and the US are holding bilateral trade agreement (BTA) talks, the US recently doubled tariffs under Section 232 — from 25 percent to 50 pc on steel, steel products, and aluminium. Auto components face a 25 pc duty, while other items are taxed at 10 pc. Unlike countries like Canada, Mexico, and the UK, India does not enjoy tariff exemptions from the US. This puts Indian exporters at a disadvantage, especially for low-margin products that are easily replaceable and sensitive to price changes, the speakers said. EEPC India chairman Pankaj Chadha, emphasised that while the BTA may take time, India must ensure that its final agreement is on par or better than those of other US trade partners. Aakash Shah, Vice Chairman of EEPC India, pointed out that India's penetration in the US engineering market remains low. India ranks only 13th among the US's engineering trade partners, with a modest 1.8 pc share. 'These small figures might offer India an opportunity to request more favourable trade terms under the ongoing BTA discussions to support its engineering exporters,' he noted. The aluminium industry raised concerns about high power costs in India, which make production expensive. In contrast, countries like Canada and those in Europe, which use cheaper renewable energy, can offer better prices and gain market share in the US. Producers in the Middle East, such as UAE and Bahrain, are also expanding rapidly. EEPC India members appreciated the Government's support in dealing with various challenges which hit the industry from time to time. Rajesh Agrawal, Special Secretary in the Department of Commerce and India's Chief Negotiator for the BTA was the chief guest at the session. UNI PC SSP
Mint
13-06-2025
- Business
- Mint
After US' 50% tariff blow, India now faces EU heat on steel quotas
New Delhi: The European Union (EU) has put India's individual quota on hold and placed it under a 'pooled quota" for exporting certain kinds of steel products to the 27-nation bloc, dealing a double whammy to a sector already reeling from America's 50% tariff. The latest move is meant to correct imbalances in the current quota system by restoring separate duty-free country-specific quotas for major exporters like Ukraine, UK, Türkiye and Korea. However, countries like India, which fall under an 'other countries" category, must share a pooled quota of around 12,500 tonnes with others, including China and Vietnam among others. The EU's notification was submitted to the Committee on Safeguards at World Trade Organization (WTO) on Wednesday. The proposed changes will come into effect from 1 July and remain in effect till 30 June 2026. This shared quota, known as the 'residual quota," applies to 'product category 17', which covers 'angles, shapes and sections of iron or non-alloy steel." Also read US rejects India again at WTO: Response to auto tariffs plea mirrors rejection over steel, aluminium dispute Under the pooled quota mechanism, any country in the pool can export any quantity. The amount a country exports is deducted from the overall quota of the pool. This means a single, large producer can quickly exhaust the full quota, analysts said. However, any country in the pool that exports the product once the 12,500-tonne limit has been exhausted attracts a 25% tariff on that additional amount. The figure for Indian exports of these particular products to the EU was not immediately available. However, In FY25, Indian shipments of articles made from iron or steel, which include 'category 17' products, stood at $1.83 billion. This is of major significance for India because it is in the final leg of discussions for a free trade agreement with the 27-nation bloc. The EU had previously removed country-wise quotas for these products in 2022 after Ukraine—then the top supplier—was unable to export due to the war with Russia. That led to a globalized system where all countries could export under a common quota, as per the EU notification. Read this India likely to seek removal of US steel tariffs in trade talks rather than immediate retaliation Presenting New Delhi's stand, a senior official said that India will discuss the issue with the EU, as the notification has provided a window for consultations from 12 to 19 June. The decision may have mixed consequences for Indian exporters. 'Being placed in the third-country quota alongside China puts us at risk of losing our share, as China (alone) could exhaust the allocation early," said Pankaj Chadha, Chairman of the Engineering Export Promotion Council (EEPC), a body under the commerce ministry. Chadha is also managing director of Jyoti Steel Industries. These changes notified by the EU include removal of a 15% cap on any single country's share of the pooled quota. While the pooled quota ensures some continued market access, it poses a significant disadvantage when compared with countries that now enjoy exclusive duty-free quotas, experts said. 'The continued access to residual quotas offers a limited but important channel for Indian steel exports. The latest adjustments also provide an opening for India to press for full access without quotas under the ongoing India–EU free trade agreement negotiations," said Arun Kumar Garodia, director, Corona Steel. Also read Govt may harness public sector undertakings to drive green steel consumption 'The EU's latest revision of its steel import safeguards may appear targeted at restoring trade balance, but in practice, it entrenches discrimination against countries like India that lack dedicated quotas," said Ajay Srivartava, co-founder, Global Trade Research Initiative (GTRI). 'By reintroducing exclusive duty-free quotas for the UK, Türkiye, and South Korea while limiting others—including India—to a small, shared residual quota, the EU has effectively locked India into a second-tier access regime," he said. Under the EU's revised safeguard system for steel, Ukraine has been allocated over 31,600 tonnes per quarter for these steel products, the UK 27,500 tonnes, Türkiye 22,900 tonnes, and South Korea 5,300 tonnes each quarter. The negotiations for an FTA with the EU are at an advanced stage and are likely to be signed in the next couple of months. Queries emailed to the commerce ministry remained unanswered till press time. And read Goyal begins France, Italy visit to deepen trade ties; India looks to fast-track EU FTA, global alliances
The Print
02-06-2025
- Business
- The Print
Trump's proposed 50pc tariff hike May hit USD 5 billion engineering exports: EEPC India
Currently, India exports around USD 5 billion worth of steel, aluminium and related products to the US annually. These metals and their derivatives constitute nearly a quarter of the country's total engineering shipments to the US, the Engineering Export Promotion Council of India said. Kolkata, Jun 2 (PTI) US President Donald Trump's proposed 50 per cent tariff on steel and aluminium imports could severely impact India's engineering goods' shipments, an engineering exports promotion body has said. The existing 25 per cent tariff on steel imports, imposed by the US on March 18, 2025, has already created a tough market for Indian exporters, it said. While India's direct steel exports to the US remain limited, the tariffs have intensified global competition and disrupted trade flows. 'If the US implements the 50 per cent tariff on steel, aluminium and their derivatives, exports of these critical items will become more expensive, likely leading to a decline in shipments,' Chairman of EEPC India, Pankaj Chadha, said. He pointed out that the UK recently secured an exemption from the 25 per cent steel and aluminium tariffs through a trade deal with the US, and suggested that India should seek a similar waiver during the ongoing Bilateral Trade Agreement (BTA) negotiations. 'This may not be the right time for such unilateral tariffs, especially when BTA talks are underway. It could complicate negotiations. The proposed hike could jeopardise engineering exports worth around USD 5 billion,' Chadha said. PTI BSM RBT This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.
