NEW DELHI: With escalating tensions between Iran and the United States reviving concerns over the Strait of Hormuz — a major choke point for global crude supplies — international oil prices have surged to a seven-month high. At 2:44 pm IST, Brent oil futures were trading at $71.60 per barrel, while West Texas Intermediate (WTI) stood at $66.45 per barrel.
Prices rose further following reports last week that Iran had partially closed the Strait of Hormuz. Experts believe India could face disruptions if the choke point is shut. India has advised its citizens to leave Iran, while the Iranian Navy has indicated it is prepared to shut down the Strait of Hormuz if directed by the country’s senior leadership. Reports suggest Iran conducted large-scale naval exercises in the Persian Gulf and the Strait of Hormuz last week.
According to Prashant Vasisht, Senior Vice President and Co-Group Head of ICRA, any disruption of shipping through the Strait of Hormuz would lead to an increase in oil prices. Over the past few days, oil prices have risen by $6-7 per barrel from ~$65 per barrel to ~$72 per barrel now due to the rising geopolitical tensions that could disrupt traffic through the strait.
Of the 5.5 million barrels of crude oil India consumes daily, around 1.5–2 million barrels pass through the Strait of Hormuz, a route vital to global energy supplies. Overall, the strait accounts for nearly 20% of global crude oil trade and about 25% of liquefied natural gas (LNG) shipments worldwide.
India’s crude import basket has also undergone changes. Following US tariffs and sanctions on two major Russian producers, Rosneft and Lukoil, India’s imports of Russian crude declined significantly. Currently, a large share of India’s crude imports comes from West Asian countries, including Saudi Arabia, Iraq, Kuwait and the UAE.
“India could procure crude from alternate geographies such as South America, US, Africa but higher prices would impact the import bill. A $10/barrel increase in oil prices would lead to a $13-14 billion increase in oil import bill,” added Vasisht.