Oil Prices Surge After US-Iran Tensions and Hormuz Closure Threat

New Delhi: Raising oil supply concerns following the US bombings on Iran, Brent crude oil prices on Monday’s early trade jumped nearly 2 per cent to $78.53 a barrel, touching the highest level since January. Later in the day, it settled at $77.45 a barrel, up by 0.57 per cent. Nevertheless, it has also triggered the further oil price hike as Iranian parliament on Sunday night approved to shut down the Strait of Hormuz, a crucial maritime route that facilitates nearly about 30 per cent of the world’s oil trade and 20 percent of global LNG shipments.

The move of the Iranian government is expected to possibly risk alienating Tehran’s neighbours and trade partners. The decision to close the waterway now rests with the country’s national security council, and its possibility has raised the spectre of higher energy prices and aggravated geopolitical tensions.

For India, analysts and experts are of the view that the situation demands careful monitoring of developments related to the Strait, global fertiliser prices, and shipping costs, which could affect the import bill in coming quarters. But the government is confident that oil-marketing companies have supplies for several weeks, which is likely to contain the downside.

The impact on India’s energy imports is significant, with oil & gas analysts claiming that approximately 40 per cent of India's crude oil imports in FY25 came through this route. Additionally, 53 per cent of India's LNG imports originated from Qatar and the UAE, according to the International Gas Union.

“A complete shutdown of the Strait of Hormuz would represent a major disruption to global oil flows, as nearly a fifth of global oil trade originates through this narrow channel. Such an event would likely trigger a sharp, short-term spike in crude prices, driven more by panic and perceived scarcity than actual supply shortages. However, the current market response has been measured with crude benchmarks still trading between $70–80 per barrel,” said Dr Kapil Garg, founder & MD, Oilmax Energy.

“This is largely due to ample global supply from producers like the US, OPEC and increased sourcing by major buyers like India from alternative routes, including a significant rise in Russian crude imports. The likelihood of a prolonged closure remains low, but should it occur, the price impact would depend on its duration, scale of disruption, and how quickly global logistics adjust,” Garg added.