Global oil prices rose nearly 10% on Monday as conflict in West Asia intensified and oil flows through the Strait of Hormuz remained disrupted, raising concerns about new supplies.
Brent for April on the Intercontinental Exchange rose more than 10% to hit a high of $81.87 a barrel when markets opened on Monday.
At 6:26 a.m., the contract was trading at $78.42 a barrel, up 7.56% from its previous close. The April West Texas Intermediate contract traded at $72.03 a barrel, up 7.30% from its previous close.
Regional escalation
The rise in prices was widely expected after the US and Israel attacked Iran and assassinated Iran’s Supreme Leader Ali Khamenei on Saturday morning.
Iran retaliated by attacking not only Israel but also US military and air bases across countries in the region including Bahrain, the United Arab Emirates, Kuwait, Qatar and Oman, turning the conflict into a regional war within hours.
Reports that Iran was attacking oil tankers trying to cross the strait halted the movement of vessels and raised concerns about global oil flows.
The Strait of Hormuz remains one of the world’s most critical energy hubs, with nearly 20% of global petroleum liquids and 20% of global liquefied natural gas (LNG) shipments passing through this route.
With Iran and several West Asian energy producers crossing the Strait of Hormuz, any escalation of regional conflict could hamper shipping through the corridor.
Exposition of India
The surge has significant implications for India, a net importer that meets nearly 90% of its oil needs through imports.
India, the world’s third-largest oil consumer, consumes about 5.5 million barrels of oil a day, of which 1.5-2 million barrels pass through this critical point. As India has already reduced its imports of Russian oil, West Asia has emerged as an alternative in the past two months.
A $1 rise in oil prices increases India’s annual import bill by about $1 ₹13,000 million crowns. In FY25, India imported oil worth $160 billion.
Mint had earlier reported that Indian refiners are exploring alternative sources to ensure uninterrupted supply.
Marginal pressure
According to Prashant Vasishta, senior vice president and joint group head, corporate ratings, ICRA Ltd, although Indian refiners may be able to source crude from alternative locations such as the US, Africa and South America, increased energy prices could lead to higher import bills.
“Additionally, sustained high oil prices are expected to moderate marketing margins and profitability of oil marketing companies,” he said.
An HSBC report on Saturday said: “Oil market risk is asymmetric in terms of possible Iran scenarios, with the Hormuz transit the main concern. There is considerable spare capacity in the Middle East region but it will not be available if Hormuz is closed.”
However, it left the oil price projection for the calendar year 2026 unchanged at $65 per barrel.
