Key Points
- Crude oil prices have surged by 13% in just one week due to the escalating war between Israel and Iran.
- Prices have jumped from $69.36 to over $77 per barrel, with analysts warning of further spikes if the conflict worsens.
- Fears of Iran closing the vital Strait of Hormuz have added a $10 risk premium to oil prices, with some forecasts suggesting crude could hit $120 per barrel.
- Global markets, especially oil-importing nations like India, are facing increased panic and uncertainty.
- India, which imports 85% of its oil, could see rising fuel prices, inflation, and fiscal pressure if crude crosses $80 per barrel.
New Delhi: The ongoing conflict between Israel and Iran has sent shockwaves through global energy markets, with crude oil prices skyrocketing at their fastest pace in years. Since Israel launched missile strikes on Iranian military bases on June 13, the region has been gripped by escalating violence, and the world is bracing for potential US intervention.
According to Reuters, the immediate aftermath of Israeli attacks on Tehran and key Iranian cities like Isfahan triggered a sharp reaction in the oil markets. Brent crude prices leapt from $69.36 to $74.23 per barrel almost overnight a 7% jump. By June 19, prices had climbed further to $77.06 per barrel, while US WTI crude reached $75.68 per barrel.
Risk Premiums and Supply Chain Fears
The war has injected a significant “risk premium” into oil prices, with traders and analysts adding up to $10 per barrel to account for the possibility of further escalation. Bloomberg reports that investors are particularly anxious about the Strait of Hormuz a critical chokepoint through which nearly a third of the world’s seaborne oil passes. If Iran were to block or disrupt shipments through the strait, experts warn that crude prices could skyrocket to as much as $120 per barrel, sending shockwaves throughout the global economy.
Impact on India and Other Importing Nations
India, which relies on imports for about 85% of its oil needs, is especially vulnerable to these price shocks. Every $1 increase in crude prices puts additional pressure on the Indian rupee, raises inflation, and drives up the cost of petrol and diesel for consumers. Experts warn that if oil prices breach the $80 per barrel mark, the Indian government could face mounting subsidy bills and a widening fiscal deficit, complicating economic recovery efforts.
Global Market Jitters
The rapid rise in oil prices has created an atmosphere of panic in financial markets worldwide. Stock indices have turned volatile, and energy-dependent economies are scrambling to assess the potential fallout. The situation remains highly fluid, with any further escalation in the Middle East likely to trigger even more dramatic swings in oil prices and global market sentiment.
