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Amid fresh fighting between the United States and Iran, oil prices have climbed sharply. Two United Arab Emirates (UAE)tankers were hit by two Iranian cruise missiles in the southern lane of the Strait of Hormuz in Omani territorial waters on Monday. All these developments have raised concerns about global oil supplies and fuel prices.
Oil Price Reaches Four-Week High
Oil prices jumped 2 percent on Tuesday, reaching their highest point since the two countries signed a memorandum of understanding on June 17. According to news agency Reuters report, Brent crude futures rose USD 1.68, or 2 per cent, to USD 84.98 per barrel. US West Texas Intermediate crude gained USD 1.65, or 2.1 per cent, to USD 79.79 per barrel. Brent had already jumped 9.6 per cent in the previous session, its biggest one-day rise since May 2020.
Why Are Oil Prices Rising?
The latest military action in the Strait of Hormuz has increased uncertainty over global energy supplies. Speaking about it, KCM Trade chief market analyst Tim Waterer said, “The latest escalation, including the US reinstatement of the blockade and Iranian responses, has clearly injected fresh risk into the market.” He added, "While a full closure hasn't occurred; the competing objectives of both sides have made the supply picture highly uncertain.
Meanwhile, according to Iranian state media, the IRGC has stated that "continued interference could lead to greater incidents in the global oil and gas sector." At the same time, US President Donald Trump has announced that the United States had reinstated its blockade of Iranian shipping. He also said he wanted the US to be reimbursed for protecting countries in the Strait of Hormuz.
What Does It Mean For India?
Experts say India could face higher oil and gas import costs if the conflict becomes more serious. Speaking to NDTV, energy economist Kirit S Parekh said a longer conflict could increase India's import bill, disrupt fuel supplies and create fresh risks for Indian sailors working in one of the world's busiest shipping routes. "If the war in the Middle East further escalates, it will increase the cost of oil and gas for India," he said.
While India now buys crude oil from more countries, it still depends heavily on Gulf nations for LPG imports. This means LPG supplies could be affected more if shipping through the Strait of Hormuz is disrupted. The Strait of Hormuz is one of the world's most important routes for oil and liquefied natural gas (LNG) shipments. Parekh further warned that the conflict could affect oil and gas production in the region. "Iran has bombed many Gulf countries after the US attacks. This can have far-reaching ramifications on the production of oil and gas too.”