US-Iran Tensions Push Oil Price Fears

Many past wars and political crises have caused oil prices to rise sharply. These include the Arab oil embargo and the Iranian Revolution in the 1970s, the Iran–Iraq war in the 1980s, the Gulf War in the early 1990s, the Libyan civil war in 2011, and Russia’s invasion of Ukraine in 2022. All these events pushed global oil prices much higher.

Now, experts are asking whether the ongoing US-Iran conflict could do the same. Analysts say that because of rising geopolitical tensions, oil prices could climb to $100 per barrel if the war continues for more than a month. In past conflicts, crude oil prices have jumped anywhere between 25% and 300%. They warn that India’s economy could face short-term pressure if prices keep rising.

Iran produces about 2.5% of the world’s oil. This is almost half of what it produced ten years ago. However, Iran plays a very important role because it controls access to the Strait of Hormuz. Around 20% of global oil supply passes through this narrow sea route.

For India, this is a big concern. In the financial year 2024-25, about 50% of India’s crude oil imports and 54% of its LNG imports came through the Strait of Hormuz. Any disruption in this route could affect India’s energy supplies.

After Iran’s recent retaliation to US-Israel strikes, fears have increased that the Strait of Hormuz could be blocked or disrupted. Because of this, Brent crude prices for May delivery rose 6.5% to $77.61 per barrel on Monday.

Between February 1 and February 18, India imported an average of 4.85 million barrels of crude oil per day. Recently, India has been buying more oil from Middle East countries to replace reduced supplies from Russia. Shipments from Saudi Arabia likely reached 1 to 1.1 million barrels per day in February, the highest level since April 2020. This makes the Middle East situation even more important for India.

According to rating agency ICRA, Indian refiners can buy oil from other regions like the United States, Africa, and South America if needed. However, higher global oil prices would increase India’s import bill and put pressure on the economy.